Dysbindin has been implicated in the pathogenesis of schizophrenia, but little is known about how dysbindin affects neuronal function in the circuitry underlying psychosis and related behaviors. Using a dysbindin knockout line (dys ؊/؊ ) derived from the natural dysbindin mutant Sandy mice, we have explored the role of dysbindin in dopamine signaling and neuronal function in the prefrontal cortex (PFC). Combined cell imaging and biochemical experiments revealed a robust increase in the dopamine receptor D2, but not D1, on cell surface of neurons from dys ؊/؊ cortex. This was due to an enhanced recycling and insertion, rather than reduced endocytosis, of D2. Disruption of dysbindin gene resulted in a marked decrease in the excitability of fast-spiking (FS) GABAergic interneurons in both PFC and striatum. Dys ؊/؊ mice also exhibited a decreased inhibitory input to pyramidal neurons in layer V of PFC. The increased D2 signaling in dys ؊/؊ FS interneurons was associated with a more pronounced increase in neuronal firing in response to D2 agonist, compared to that in wild-type interneurons. Taken together, these results suggest that dysbindin regulates PFC function by facilitating D2-mediated modulation of GABAergic function.dopamine D2 receptor ͉ schizophrenia ͉ prefrontal cortex G enetic variants in a gene on 6p22.3, dysbindin (DTNBP1), have been shown to be one of the several genes that are associated with schizophrenia (1). Schizophrenia patients have significantly reduced expression of dysbindin mRNA and protein in prefrontal cortex and hippocampus (2, 3). While it remains unclear how changes in dysbindin expression could contribute to the pathogenesis of schizophrenia, cell biological studies have begun to address the physiological function of dysbindin in neurons. Downregulation of dysbindin by siRNA in cultured neurons leads to decreases in the expression of SNAP25 and levels of extracellular glutamate or dopamine (4, 5). Dysbindin contributes to normal biogenesis of lysosome-related organelles (LROs) by binding to proteins in the BLOC-1 complex (6, 7), which regulates trafficking of LROs. The Sandy mouse (Sdy), which harbors an in-frame deletion of two exons of the dysbindin gene (8), exhibits a reduced readily releasable pool of synaptic vesicles and larger vesicle size (9). Although dysbindin protein is localized both pre-and postsynaptically (7), little is known about its postsynaptic function. Recently, downregulation of dysbindin has been shown to increase cell surface expression of dopamine receptor D2 (D2), but not dopamine receptor D1 (D1), in human SH-SY5Y neuroblastoma cells and in cultured cortical neurons (10). Dopamine receptor internalization (or endocytosis) is a general mechanism to adjust neuronal responses to dopamine stimulation. Both D1 and D2 are G protein coupled receptors (GPCRs) that undergo constitutive and ligand-induced internalization. Unlike D1, which is recycled back to the plasma membrane after endocytosis, D2 is generally trafficked to the lysosomal pathway and degraded (11)(1...