IMPORTANCE Individuals with schizophrenia can encode item-specific information to support familiarity-based recognition but are disproportionately impaired encoding interitem relationships (relational encoding) and recollecting information. The Relational and Item-Specific Encoding (RiSE) paradigm has been used to disentangle these encoding and retrieval processes, which may depend on specific medial temporal lobe (MTL) and prefrontal cortex (PFC) subregions. Functional magnetic resonance (fMRI) imaging during RiSE task performance could help to specify dysfunctional neural circuits in schizophrenia that can be targeted for interventions to improve memory and functioning in the illness. OBJECTIVES To use fMRI to test the hypothesis that schizophrenia disproportionately affects MTL and PFC subregions during relational encoding and retrieval relative to item-specific memory processes, and to use fMRI results from healthy individuals serving as controls to establish neural construct validity for RiSE. DESIGN, SETTING, AND PARTICIPANTS This multisite, case-control, cross-sectional fMRI study was conducted between November 1, 2010, and May 30, 2012, at 5 Cognitive Neuroscience Test Reliability and Clinical Applications for Schizophrenia sites. The final sample included 52 outpatients with clinically stable schizophrenia and 57 demographically matched healthy control participants. Data analysiswas performed between February 1, 2013, and May 30, 2014. MAIN OUTCOMES AND MEASURES Behavioral performance speed and accuracy (d') on item recognition and associative recognition tasks. Voxelwise statistical parametric maps for a priori MTL and PFC regions of interest to test activation differences between relational and item-specific memory during encoding and retrieval. RESULTS Item recognition was disproportionately impaired in patients with schizophrenia relative to healthy control participants following relational encoding (F1,107 = 4.7; P = .03). The differential deficit was accompanied by reduced dorsolateral PFC activation during relational encoding in patients with schizophrenia compared with healthy control participants (z > 2.3; P < .05 corrected). Retrieval success (hits > misses) was associated with hippocampal activation in healthy control participants during relational item recognition and associative recognition conditions, and hippocampal activation was specifically reduced in schizophrenia for recognition of relational but not item-specific information (z > 2.3; P < .05 corrected). CONCLUSIONS AND RELEVANCE In this unique, multisite fMRI study, results in the healthy control group supported RiSE construct validity by revealing expected memory effects in PFC and MTL subregions during encoding and retrieval. Comparison of schizophrenic and healthy control participants revealed disproportionate memory deficits in schizophrenia for relational vs item-specific information, accompanied by regionally and functionally specific deficits in dorsolateral PFC and hippocampal activation.