The identification of neurobiological intermediate phenotypes may hasten the search for susceptibility genes in complex psychiatric disorders such as schizophrenia. Earlier family studies have suggested that deficits in executive cognition and working memory may be related to genetic susceptibility for schizophrenia, but the biological basis for this behavioral phenotype has not been identified. The authors used functional magnetic resonance imaging (fMRI) during performance of the N-back working memory task to assess working memory-related cortical physiology in nonschizophrenic, cognitively intact siblings of patients with schizophrenia. They compared 23 unaffected siblings of schizophrenic patients to 18 matched comparison subjects. As a planned replication, they studied another 25 unaffected siblings and 15 comparison subjects. In both cohorts, there were no group differences in working memory performance. Nevertheless, both groups of siblings showed an exaggerated physiological response in the right dorsolateral prefrontal cortex that was qualitatively similar to results of earlier fMRI studies of patients with schizophrenia. These fMRI data provide direct evidence of a primary physiological abnormality in dorsolateral prefrontal cortex function in individuals at greater genetic risk for schizophrenia, even in the absence of a manifest cognitive abnormality. This exaggerated fMRI response implicates inefficient processing of memory information at the level of intrinsic prefrontal circuitry, similar to earlier findings in patients with schizophrenia. These data predict that inheritance of alleles that contribute to inefficient prefrontal information processing will increase risk for schizophrenia.