The University of Nottingham researchers demonstrated that the severity of symptoms such as delusions and hallucinations which are typical in patients with the psychiatric disorder is caused by a disconnection between two important regions in the brain - the insula and the lateral frontal cortex.
The breakthrough could form the basis for better, more targeted treatments for schizophrenia with fewer side effects, researchers said.
The four-year study, led by Professor Peter Liddle and Dr Lena Palaniyappan in the University's Division of Psychiatry and based in the Institute of Mental Health, centred on the insula region, a segregated 'island' buried deep within the brain, which is responsible for seamless switching between inner and outer world.
"This could explain why internal thoughts sometime appear as external objective reality, experienced as voices or hallucinations in this condition.
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"This could also explain the difficulties in 'internalising' external material pleasures (eg enjoying a musical tune or social events) that result in emotional blunting in patients with psychosis. Our observation offers a powerful mechanistic explanation for the formation of psychotic symptoms," he said.
The results showed that whereas the majority of healthy patients were able to make this switch between regions, the patients with schizophrenia were less likely to shift to using their frontal cortex.
The insular and frontal cortex form a sensitive 'salience' loop within the brain - the insular should stimulate the frontal cortex while in turn the frontal cortex should inhibit the insula - but in patients with schizophrenia this system was found to be seriously compromised.
The results suggest that detecting the lack of a positive influence from the insula to the frontal cortex using fMRI could have a high degree of predictive value in identifying patients with schizophrenia.