Introduction: Blunted, inappropriate affective-social behavior is a hallmark of early schizophrenia, possibly corresponding to reduced ability to recognize and express emotions. It is yet unknown if this affective deficiency relates to disturbed neural sensitivity to facial expressions or to overall face processing. In a previous imaging study, healthy subjects showed less suppression of the fusiform gyrus (FG) to repeated presentation of the same transfigured-bizarre face relative to regular face. We assumed that the FG in schizophrenia will show reduced repetition related sensitivity to transfigured-bizarre faces, while having overall normal response to faces. Methods: Ten first-episode patients with schizophrenia and 10 controls rated the bizarreness of upright and inverted faces. In an fMRI study, another group of 17 first-episode patients with schizophrenia and 12 controls viewed regular and transfigured-bizarre faces in blocks. Each block contained regular- or transfigured-bizarre faces of either different or same individual, presented in an upright or inverted orientation. Results: Patients in comparison with controls rated irregular faces as less bizarre. The FG, in patients and controls exhibited similar response to inverted faces, suggesting normal face processing. In contrast, the FG only in patients, showed similar suppression to repeated transfigured-bizarre and regular faces. Finally, the FG in patients compared with controls showed reduced functional connectivity with the amygdala and prefrontal cortex. Conclusion: Patients with schizophrenia already at first-episode, showed reduced behavioral and neural sensitivity to bizarre facial expressions. Possibly, this deficiency is related to disturbed modulations of emotion-related face processing in the FG by the amygdala and prefrontal cortex. Hum Brain Mapp 2009. © 2009 Wiley-Liss, Inc.