BACKGROUND Recent work suggests that episodic memory deficits in schizophrenia may be related to disturbances of encoding or retrieval. Schizophrenia patients appear to benefit from instruction in episodic memory strategies. We tested the hypothesis that providing effective encoding strategies to schizophrenia patients enhances encoding-related brain activity and recognition performance. METHODS Seventeen schizophrenia patients and 26 healthy comparison subjects underwent functional magnetic resonance imaging scans while performing incidental encoding tasks of words and faces. Subjects were required to make either deep (abstract/concrete) or shallow (alphabetization) judgments for words and deep (gender) judgments for faces, followed by subsequent recognition tests. RESULTS Schizophrenia and comparison subjects recognized significantly more words encoded deeply than shallowly, activated regions in inferior frontal cortex (Brodmann area 45/47) typically associated with deep and successful encoding of words, and showed greater left frontal activation for the processing of words compared with faces. However, during deep encoding and material-specific processing (words vs. faces), participants with schizophrenia activated regions not activated by control subjects, including several in prefrontal cortex. CONCLUSIONS Our findings suggest that a deficit in use of effective strategies influences episodic memory performance in schizophrenia and that abnormalities in functional brain activation persist even when such strategies are applied.