Developing and mature midbrain dopamine (DA) neurons express fibroblast growth factor (FGF) receptor-1 (FGFR1). To determine the role of FGFR1 signaling in the development of DA neurons, we generated transgenic mice expressing a dominant negative mutant [FGFR1(TK-)] from the catecholaminergic, neuron-specific tyrosine hydroxylase (TH) gene promoter. In homozygous th(tk-)/th(tk-) mice, significant reductions in the size of TH-immunoreactive neurons were found in the substantia nigra compacta (SNc) and the ventral tegmental area (VTA) at postnatal days 0 and 360. Newborn th(tk-)/th(tk-) mice had a reduced density of DA neurons in both SNc and VTA, and the changes in SNc were maintained into adulthood. The reduced density of DA transporter in the striatum further demonstrated an impaired development of the nigro-striatal DA system. Paradoxically, the th(tk-)/th(tk-) mice had increased levels of DA, homovanilic acid and 3-methoxytyramine in the striatum, indicative of excessive DA transmission. These structural and biochemical changes in DA neurons are similar to those reported in human patients with schizophrenia and, furthermore, these th(tk-)/th(tk-) mice displayed an impaired prepulse inhibition that was reversed by a DA receptor antagonist. Thus, this study establishes a new developmental model for a schizophrenia-like disorder in which the inhibition of FGF signaling leads to alterations in DA neurons and DA-mediated behavior.