Project Summary/Abstract Auditory hallucinations (AH) are experienced by approximately 60-80% of individuals with schizophrenia (SZ), and are often associated with significant distress and functional disability. Many individuals who experience these symptoms do not respond adequately to standard treatments with antipsychotic medication, and/or experience adverse side effects from these treatments. Thus, there is an urgent need to better understand AH pathophysiology to inform the development of novel, targeted interventions. Recent mechanistic models of psychosis suggest that AH may result from a pathological overweighting of expectations relative to bottom-up sensory signals during perception, and that lower-level sensory processing impairments in SZ may contribute to this pathology. Therefore, the goal of the proposed project is to investigate these potential AH mechanisms by leveraging recent advances in the use of electroencephalography (EEG) to index hierarchical processing of natural speech. The specific aims are to evaluate whether AH in SZ are associated with: 1) impaired auditory processing of speech stimuli; and 2) alterations in the effects of prior knowledge regarding speech content on the auditory processing of speech. Fifty-six SZ participants will be recruited, specifically 28 with AH (AH+) and 28 without AH (AH-), along with a group of 28 matched healthy control participants (HC). EEG will be recorded as participants listen to speech segments that are either unaltered or acoustically degraded. EEG responses will be modeled to derive indices of auditory encoding of speech. Measures of the effects of prior knowledge will be based on the lexical predictability of narrative speech, and the manipulation of prior knowledge regarding the content of degraded speech. It is hypothesized that AH in SZ will be associated with impaired auditory encoding of speech and a greater influence of prior knowledge on this encoding, and that within AH+, these two alterations will be related. Results will provide data on unanswered questions regarding AH mechanisms, and will be used to support an NIH grant proposal of a larger, well-powered investigation of AH pathophysiology in psychotic disorders and of potential subgroups with regard to underlying pathology. This work has the potential to inform the identification of novel therapeutic targets for AH, along with biomarkers of underlying pathology that can be used to identify subgroups most likely to benefit from particular intervention strategies. Given the significant unmet therapeutic need this line of work aims to address, and its relevance to transdiagnostic mechanisms of psychosis and mechanistic heterogeneity within diagnostic categories, these efforts are consistent with the public health mission of NIMH and its Research Domain Criteria (RDoC) initiative.