This article reviews how functional neuroimaging research of cognitive dysfunction in schizophrenia has resulted in a progression of influential pathophysiological models of the disorder. The review begins with discussion of the 'hypofrontality' model, moving from resting studies examining anterior to posterior gradients of cerebral blood flow (CBF), to cognitive activation studies employing the Wisconsin Card Sorting Test, and current functional magnetic resonance imaging (fMRI) studies of working memory and cognitive control utilizing parametric task designs and event-related procedures. A similar progression is described for development of the temporal lobe model of schizophrenia, moving from research on the temporal cortex and language processing to the hippocampal formation and long-term memory (LTM). These LTM studies found that hippocampal dysfunction was often accompanied by disrupted prefrontal function, supporting a hybrid model of impaired fronto-temporal connectivity. Developments in image analysis procedures are described that allow assessment of these distributed network models. However, given limitations in temporal and spatial resolution, current methods do not provide 'real-time' imaging of network activity, making arrival at a definitive pathophysiologic mechanism difficult. Dorsolateral prefrontal cortex (DLPFC) dysfunction and disrupted fronto-temporal integration appear to be equally viable current models. The article concludes with a discussion of how fMRI can help facilitate development of novel psychosocial and pharmacological interventions designed to improve cognition and functional outcome in patients with schizophrenia.