Structural and polymorphic variations in Neuregulin 3 (NRG3), 10q22-23 are associated with a broad spectrum of neurodevelopmental disorders including developmental delay, cognitive impairment, autism, and schizophrenia. NRG3 is a member of the neuregulin family of EGF proteins and a ligand for the ErbB4 receptor tyrosine kinase that plays pleotropic roles in neurodevelopment. Several genes in the NRG-ErbB signaling pathway including NRG1 and ErbB4 have been implicated in genetic predisposition to schizophrenia. Previous fine mapping of the 10q22-23 locus in schizophrenia identified genome-wide significant association between delusion severity and polymorphisms in intron 1 of NRG3 (rs10883866, rs10748842, and rs6584400). The biological mechanisms remain unknown. We identified significant association of these SNPs with increased risk for schizophrenia in 350 families with an affected offspring and confirmed association to patient delusion and positive symptom severity. Molecular cloning and cDNA sequencing in human brain revealed that NRG3 undergoes complex splicing, giving rise to multiple structurally distinct isoforms. RNA expression profiling of these isoforms in the prefrontal cortex of 400 individuals revealed that NRG3 expression is developmentally regulated and pathologically increased in schizophrenia. Moreover, we show that rs10748842 lies within a DNA ultraconserved element and homedomain and strongly predicts brain expression of NRG3 isoforms that contain a unique developmentally regulated 5' exon (P = 1.097E(-12) to 1.445E(-15)). Our observations strengthen the evidence that NRG3 is a schizophrenia susceptibility gene, provide quantitative insight into NRG3 transcription traits in the human brain, and reveal a probable mechanistic basis for disease association.