BACKGROUND The exact mechanism behind auditory hallucinations in schizophrenia remains unknown. A corollary discharge dysfunction hypothesis has been put forward, but it requires further confirmation. Electroencephalography (EEG) of the Deutsch octave illusion might offer more insight, by demonstrating an abnormal cerebral activation similar to that under auditory hallucinations in schizophrenic patients. METHODS We invited 23 first-episode schizophrenic patients with auditory hallucinations and 23 healthy participants to listen to silence and two sound sequences, which consisted of alternating 400- and 800-Hz tones. EEG spectral power and coherence values of different frequency bands, including theta rhythm (3.5-7.5 Hz), were computed using 32 scalp electrodes. Task-related spectral power changes and task-related coherence differences were also calculated. Clinical characteristics of patients were rated using the Positive and Negative Syndrome Scale. RESULTS After both sequences of octave illusion, the task-related theta power change values of frontal and temporal areas were significantly lower, and the task-related theta coherence difference values of intrahemispheric frontal-temporal areas were significantly higher in schizophrenic patients than in healthy participants. Moreover, the task-related power change values in both hemispheres were negatively correlated and the task-related coherence difference values in the right hemisphere were positively correlated with the hallucination score in schizophrenic patients. LIMITATIONS We only tested the Deutsch octave illusion in primary schizophrenic patients with acute first episode. Further studies might adopt other illusions or employ other forms of schizophrenia. CONCLUSION Our results showed a lower activation but higher connection within frontal and temporal areas in schizophrenic patients under octave illusion. This suggests an oversynchronized but weak frontal area to exert an action to the ipsilateral temporal area, which supports the corollary discharge dysfunction hypothesis.