Working memory dysfunction is a core component of schizophrenia, which likely contributes substantially to the pervasive and profound cognitive deficits observed in patients with this illness. Developments in functional imaging have facilitated the investigation of the neural basis of these cognitive deficits. A strong tradition within neuropsychology has been that circumscribed lesions provide observations which constrain theoretical models, and generate testable predictions on the basis of observed relationships between structural abnormalities and behavioral dysfunction. In this article, the extent to which the neuropsychological tradition can be applied to neuropsychiatry to advance understanding of the biological basis of working memory is addressed. Empirical studies in schizophrenia research are reviewed in relation to principles of normal brain function sub-serving working memory: the functional role of the lateral prefrontal cortex, physiological response capacity constraints, inter-regional functional integration, and compensatory adaptations. However, complex heterogeneous psychiatric disorders such as schizophrenia cannot be considered akin to a pure lesion model, and there are considerable methodological challenges in interpreting disruptions of working memory in psychiatric conditions, resulting from clinical, treatment and performance related confounds. The increasing use of psychopharmacological models of disease in healthy human subjects is therefore considered as an attempt to address, or to some extent circumvent these issues.