Functional neuroimaging emerged with great promise and has provided fundamental insights into the neurobiology of schizophrenia. However, it has faced challenges and criticisms, most notably a lack of clinical translation. This paper provides a comprehensive review and critical summary of the literature on functional neuroimaging, in particular functional magnetic resonance imaging (fMRI), in schizophrenia. We begin by reviewing research on fMRI biomarkers in schizophrenia and the clinical high risk phase through a historical lens, moving from case‐control regional brain activation to global connectivity and advanced analytical approaches, and more recent machine learning algorithms to identify predictive neuroimaging features. Findings from fMRI studies of negative symptoms as well as of neurocognitive and social cognitive deficits are then reviewed. Functional neural markers of these symptoms and deficits may represent promising treatment targets in schizophrenia. Next, we summarize fMRI research related to antipsychotic medication, psychotherapy and psychosocial interventions, and neurostimulation, including treatment response and resistance, therapeutic mechanisms, and treatment targeting. We also review the utility of fMRI and data‐driven approaches to dissect the heterogeneity of schizophrenia, moving beyond case‐control comparisons, as well as methodological considerations and advances, including consortia and precision fMRI. Lastly, limitations and future directions of research in the field are discussed. Our comprehensive review suggests that, in order for fMRI to be clinically useful in the care of patients with schizophrenia, research should address potentially actionable clinical decisions that are routine in schizophrenia treatment, such as which antipsychotic should be prescribed or whether a given patient is likely to have persistent functional impairment. The potential clinical utility of fMRI is influenced by and must be weighed against cost and accessibility factors. Future evaluations of the utility of fMRI in prognostic and treatment response studies may consider including a health economics analysis.