A rapidly growing body of data suggests that dysfunction in serotonergic (5-HT) function may be involved in the pathophysiology of schizophrenia, and that pharmacologic agents for this illness have their therapeutic effects mediated through serotonergic mechanisms. The purpose of this paper is to critically review data relevant to 5-HT's role in the pathophysiology and drug treatment of schizophrenia. Pathophysiologic evidence includes the psychotomimetic effects of lysergic acid (LSD), postmortem studies, single-dose 'challenge' studies and investigations of CSF and peripheral levels of 5-HT and its metabolites. The current nomenclature, potential therapeutic effects and importance of 5-HT receptor subtype antagonism will be examined. In addition, relatively novel strategies of 5-HT uptake blockade and direct acting 5-HT agonists will be assessed. A hypothesis of cortical-subcortical imbalance with an increase in subcortical 5-HT function responsible for positive symptoms and a decrease in prefrontal 5-HT function responsible for negative symptoms is proposed. Future implications of these data are discussed.