|Schizophrenia is a heterogeneous and functionally disabling illness that impacts individuals, their families, and society. Many individuals with schizophrenia do not achieve good clinical outcomes despite receiving optimal treatments, highlighting the need for novel treatment targets. An excitation-inhibition imbalance in the hippocampus results in hippocampal hyperactivity and structural deficits in schizophrenia patients. Converging evidence suggests that hippocampal hyperactivity may be a potential treatment target for schizophrenia. However, establishing this abnormality as a treatment target requires clarifying two fundamental questions. First, when does hippocampal dysfunction arise? Second, what are the neural mechanisms driving the excitation-inhibition imbalance? This thesis aims to test two mechanisms of hippocampal dysfunction to address these questions and advance our understanding of hippocampal hyperactivity. First, the relationship between incomplete hippocampal inversion (IHI), an anatomic variant of the hippocampus that arises during the second trimester of development, and schizophrenia was explored to better understand when hippocampal deficits arise. In a sample of 161 healthy control participants and 199 schizophrenia patients, IHI was more prevalent and severe. Further, IHI affected hippocampal volume and shape and determined shape differences localized to the CA1 subfield of the hippocampus, providing evidence that hippocampal abnormalities in schizophrenia can be attributed to a variant arising during a specific perinatal period. Second, the impact of low-dose levetiracetam, an anti-epileptic treatment, on hippocampal activity was examined to better understand the neural mechanisms contributing to the excitation-inhibition imbalance. Thirty healthy control participants and thirty schizophrenia patients completed a randomized, double-blind, placebo-controlled, cross-over trial. Despite a substantial body of prior literature reporting hippocampal hyperactivity and abnormal hippocampal recruitment in schizophrenia patients, these findings were not replicated after placebo treatment. Further, levetiracetam did not demonstrate a treatment effect on hippocampal activity or differentiate between groups. Negative results in this study were likely the result of patient heterogeneity, limitations of the neuroimaging methods, and the study design. Future target engagement studies with pharmacologic agents are necessary to elucidate the neural mechanisms driving hippocampal hyperactivity. Altogether, this work tested excitation-inhibition and neurodevelopmental mechanisms to advance our understanding of hippocampal dysfunction in psychosis.