Disrupted-in-schizophrenia 1 (DISC1) is a promising schizophrenia candidate gene expressed predominantly within the hippocampus. We typed 12 single-nucleotide polymorphisms (SNPs) that covered the DISC1 gene. A three-SNP haplotype [hCV219779 (C)-rs821597 (G)-rs821616 (A)] spanning 83 kb of the gene was associated with schizophrenia in a family-based sample (P = 0.002). A common nonconservative SNP (Ser704Cys) (rs821616) within this haplotype was associated with schizophrenia (P = 0.004). Based on primary expression of DISC1 in hippocampus, we hypothesized that allelic variation at Ser704Cys would have a measurable impact on hippocampal structure and function as assayed via specific hippocampus-related intermediate phenotypes. In addition to overtransmission in schizophrenia, the Ser allele was associated with altered hippocampal structure and function in healthy subjects, including reduced hippocampal gray matter volume and altered engagement of the hippocampus during several cognitive tasks assayed with functional magnetic resonance imaging. These convergent data suggest that allelic variation within DISC1, either at Ser704Cys or haplotypes monitored by it, increases the risk for schizophrenia and that the mechanism of this effect involves structural and functional alterations in the hippocampal formation.