Subanesthetic doses of the psychomimetic, ketamine, have been used for many years to elicit behavioral effects reminiscent of schizophrenia in both healthy humans and in animal models of the disease. More recently there has been a move towards the use of simple neurophysiological measures (event related potentials, brain oscillations) to assay the functional integrity of neuronal circuits in schizophrenia since these measures can be assessed in patients, healthy controls, intact animals, and even in brain slices. Furthermore, alterations of these measures are correlated with basic information processing deficits which are now considered central to the disease. Thus, here we review recent studies which determine the effect of ketamine on these measures and discuss to what extent they recapitulate findings in schizophrenic patients. In particular, we examine methodological differences between human and animal studies and compare in vivo and in vitro effects of ketamine. Ketamine acts on multiple cortical and subcortical sites, as well as on receptors other than the NMDA receptor. Acute ketamine models changes correlated with psychotic states (e.g. increased baseline gamma band oscillations) whereas chronic ketamine causes cortical circuit changes and neurophysiological deficits (e.g. impaired event- related gamma band oscillations) correlated with cognitive impairments in schizophrenia.