There is a substantive literature on the behavioral effects of psychosocial stressors on schizophrenia. More recently, research has been conducted on neurohormonal indicators of stress responsivity, particularly cortisol release resulting from activation of the hypothalamic-pituitary-adrenal (HPA) axis. This article integrates the psychosocial and biological literatures on stress in schizophrenia, and it offers specific hypotheses about the neural mechanisms involved in the effects of stressors on the diathesis. Both the behavioral and biological data indicate that stress worsens symptoms and that the diathesis is associated with a heightened response to stressors. A neural mechanism for these phenomena is suggested by the augmenting effect of the HPA axis on dopamine (DA) synthesis and receptors. Assuming the diathesis for schizophrenia involves an abnormality in DA receptors, it is proposed that the HPA axis acts as a potentiating system by means of its effects on DA. At the same time, DA receptor abnormality and hippocampal damage render the patient hypersensitive to stress. This neural diathesis-stress model is consistent with findings on prenatal factors and brain abnormalities in schizophrenia, and it provides a framework for explaining some key features of the developmental course and clinical presentation.