Background and rationale: Pharmacotherapy of schizophrenia has traditionally targeted positive psychotic symptoms. An emerging view is that developing medications that improve cognition in schizophrenia patients is a major step forward in achieving better functional outcome. The cognitive deficits that are often observed in schizophrenia can be assessed using (1) neuropsychological tests; and (2) neurophysiological tests, the topic of this article. These neurophysiological measures cover a spectrum from automatic preattentional to attention-dependent processes. Objectives: This article focuses on cognitive deficits that appear to be promising targets for a new "third generation" of medications that may be used to treat schizophrenia and other patients with specific deficits in cognition and functioning. We discuss the possible use of the following six measures of preattentional and attention-dependent cognitive deficits: mismatch negativity, P50 event-related potential suppression, prepulse inhibition of the startle response, P300 event-related potential, continuous performance task performance, and oculomotor antisaccade performance. Conclusions: The use of preattentional and attention-dependent measures offer unique opportunities to improve our armamentarium of pharmacologic strategies for the treatment of cognitive deficits in schizophrenia patients. This review illustrates the usefulness of these measures as targets for existing and new antipsychotic medications that will potentially (1) characterize the cognitive deficits that occur in schizophrenia patients and (2) assess medication-related improvement on these measures and the potential associated improvement in functional outcome.