Although circular RNAs (circRNAs) are enriched in the mammalian brain, very little is known about their potential involvement in brain function and psychiatric disease. Here, we show that circHomer1a, a neuronal-enriched circRNA abundantly expressed in the frontal cortex, derived from Homer protein homolog 1 (HOMER1), is significantly reduced in both the prefrontal cortex (PFC) and induced pluripotent stem cell-derived neuronal cultures from patients with schizophrenia (SCZ) and bipolar disorder (BD). Moreover, alterations in circHomer1a were positively associated with the age of onset of SCZ in both the dorsolateral prefrontal cortex (DLPFC) and orbitofrontal cortex (OFC). No correlations between the age of onset of SCZ and linear HOMER1 mRNA were observed, whose expression was mostly unaltered in BD and SCZ postmortem brain. Using in vivo circRNA-specific knockdown of circHomer1a in mouse PFC, we show that it modulates the expression of numerous alternative mRNA transcripts from genes involved in synaptic plasticity and psychiatric disease. Intriguingly, in vivo circHomer1a knockdown in mouse OFC resulted in specific deficits in OFC-mediated cognitive flexibility. Lastly, we demonstrate that the neuronal RNA-binding protein HuD binds to circHomer1a and can influence its synaptic expression in the frontal cortex. Collectively, our data uncover a novel psychiatric disease-associated circRNA that regulates synaptic gene expression and cognitive flexibility.