Certain animal models can greatly enhance our understanding of the neurobiology of schizophrenia and can be used to predict the antipsychotic activity of compounds. Prepulse inhibition (PPI), the reduction in startle produced by a prepulse stimulus, is diminished in schizophrenia patients. Theoretically, deficient PPI in schizophrenia patients is a measure of the loss of sensorimotor gating that may lead to sensory flooding and cognitive fragmentation. In rats, PPI is disrupted by systemic administration of dopamine agonists, serotonin agonists, or glutamate antagonists and by a variety of surgical or pharmacological manipulations of neural circuitry linking the limbic cortex, striatum, pallidum, and pontine reticular formation. This article describes several different ways the loss of PPI in rats can be used as a model for studying the pathophysiology and neurobiology of impaired sensorimotor gating in schizophrenia patients and for predicting antipsychotic activity in novel compounds. First, new experimental strategies may be used to distinguish behavioral profiles of “typical” versus “atypical” antipsychotics. Second, this paradigm can be used to study the effects of early developmental insults—including neonatal lesions and isolated rearing—on the adult emergence of deficient sensorimotor gating. Third, using different animal strains and species, as well as gene “knockout” strategies, greatly increases our ability to understand specific genetic or receptor contributions to the regulation of deficient PPI. Each of these uses of the PPI paradigm is enhanced by studies of the basic brain substrates that regulate PPI in rats and by the increasingly sophisticated assessments of PPI and related measures in schizophrenia spectrum patients.