Computer analysis of the electroencephalogram (CEEG) in psychotic children before and after pharmacotherapy, normal children of schizophrenic mothers, and matched normal children of normal parents indicated significant intergroup differences. The psychotic children had more slow, as well as very fast, EEG waves. With drug therapy the EEG showed a partial "normalization," as fast EEG activity decreased. The EEG and auditory evoked potential of children of schizophrenic mothers were strikingly similar to those of psychotic children and schizophrenic adults, with significant decreases of the average EEG amplitude and the evoked potential latencies. Psychotic children were distinctly differentiated from the normal children by discriminant function analysis of the EEG and EP. Quantitative analysis of brain functions in the mentally ill can help determine the neurophysiological correlates of behavior, a more scientific diagnostic classification, prognosis, and selection of therapy.