Hypersensitivity to sensory stimulation is a prominent characteristic of both schizophrenia and mania. Neurophysiological recordings suggest a common deficit in a central neuronal sensory gating mechanism which regulates sensitivity to repeated auditory stimuli. Dopamine and norepinephrine are hypothesized to have major roles in these illnesses, but their role in aberrant sensory processing has not yet been proved. Presumptive evidence for effects of catecholamines on sensory processing comes from psychophysiological studies of normal subjects challenged with stimulants who show decreased sensory gating, and studies of psychotic patients treated with neuroleptics who show improved function. Studies of similar phenomena in animals show comparable effects of catecholamines on sensory processing, both behaviorally and at the single neuron level. In this study, gating of auditory evoked potentials (EPs) during treatment of both illnesses was compared with plasma dopamine and norepinephrine metabolites. Comparisons of medicated and unmedicated states showed that schizophrenic patients have a fixed deficit in sensory gating, which is a familial trait, unchanged by medication. During acute illness, they have an additional transient hypersensitivity to stimuli, manifested as smaller EPs, which seems to be mediated by dopamine. Manic patients have only the deficit in sensory gating, which is transient and seems to be mediated by norepinephrine. Thus, similar neurophysiological deficits in the two psychoses are associated with different biochemical abnormalities, which may explain similarities in acute symptoms and differences in other aspects of the illnesses, such as their response to treatment.