Schizophrenia is associated with abnormal processing of salient stimuli, which may contribute to clinical symptoms. We used fMRI and a standard auditory 3-stimulus task to examine attention processing. Target stimuli and novel distractors were presented to 17 patients and 21 healthy controls and activation was correlated with negative and positive symptoms. To targets, patients overactivated multiple regions including premotor cortex, anterior cingulate, temporal cortex, insula, and hippocampus, and also showed attenuated deactivation within occipital cortex. To distractors, patients overactivated left ventrolateral prefrontal cortex. This overactivation may reflect hypersensitivity to salient stimuli in schizophrenia. Patients also exhibited an inverse correlation between negative symptom severity and activation to novel distractors in the dorsolateral prefrontal cortex, premotor area, and ventral striatum. Novelty-induced activity within prefrontal cortex and ventral striatum may represent a useful intermediate phenotype for studies of negative symptoms.