Bioactive lipids, in particular arachidonic acid (AA), are vital for monoaminergic neurotransmission, brain development and synaptic plasticity. Phospholipases A2 (PLA2) are key-enzymes in AA metabolism and are activated during monoaminergic neurotransmission. Reduced membrane AA levels, and an altered activity of PLA2 have been found in peripheral membranes of drug-naïve patients with schizophrenia with some conflicting results in more chronic patient populations. Furthermore, in vivo brain phosphorus-31 magnetic resonance spectroscopy suggests reduced lipid membrane precursors (phosphomonoesters) and increased membrane breakdown products (phosphodiesters) in drug-naïve or early treated first-episode schizophrenia patients compared to age-matched controls or chronic populations and these changes were correlated with peripheral red blood cell membrane AA levels. We postulate that processes modulating membrane lipid metabolism are associated with psychotic illnesses and might partially explain the mechanism of action of antipsychotic agents, as well as experimental agents such as purified ethyl-eicosapentaenoic acid (E-EPA). Recent supplementation trials suggest that E-EPA is a modestly effective augmentation treatment resulting in reduced doses of antipsychotic medication in acutely ill patients with schizophrenia (but not in residual-type schizophrenia). This review investigates the role of bioactive lipids in schizophrenia and its treatment, as well as its potential use in prevention.