A cerebral basis for the acquisition and retention of procedural knowledge in schizophrenia was examined with 1.5 T functional MRI during an embedded sequence Serial Reaction Time Task (SRTT) in 10 chronic medicated patients and 15 healthy controls. Comparable procedural learning was observed in both groups, suggesting that the impairment reported in previous schizophrenia samples may not be robust. Consistent with previous fMRI reports, procedural learning in the control group was associated with activity in the dorsal striatum, anterior cingulate, parietal cortex and frontal cortex. Greater procedural learning related activity was observed in the control relative to the schizophrenia group in the bilateral frontal, left parietal and bilateral caudate regions. Patients did not activate frontal or parietal areas while responding to the embedded sequence within the SRTT, but greater activation during procedural learning was observed relative to the control sample in the right anterior cingulate, left globus pallidus and the right superior temporal gyrus. Thus, despite comparable instantiation of procedural learning in schizophrenia, the cerebral activation associated with this cognitive skill was abnormal. The paucity of activity in bilateral frontal cortex, left parietal cortex and bilateral caudate nucleus may represent cerebral dysfunction associated with schizophrenia, whereas the hyperactivation of the right superior temporal gyrus, the right anterior cingulate cortex and the left globus pallidus may represent a compensatory cerebral action capable of facilitating near-normal task performance. The results are thus consistent with a neurodevelopmental pathology impinging on fronto-subcortical circuitry.