Genome‐wide association studies have identified 3p21.1 as a robust risk locus for schizophrenia. However, the underlying molecular mechanisms remain elusive. Here a functional regulatory variant (rs2535629) is identified that disrupts CTCF binding at 3p21.1. It is confirmed that rs2535629 is also significantly associated with schizophrenia in Chinese population and the regulatory effect of rs2535629 is validated. Expression quantitative trait loci analysis indicates that rs2535629 is associated with the expression of three distal genes (GLT8D1, SFMBT1, and NEK4) in the human brain, and CRISPR‐Cas9‐mediated genome editing confirmed the regulatory effect of rs2535629 on GLT8D1, SFMBT1, and NEK4. Interestingly, differential expression analysis of GLT8D1, SFMBT1, and NEK4 suggested that rs2535629 may confer schizophrenia risk by regulating SFMBT1 expression. It is further demonstrated that Sfmbt1 regulates neurodevelopment and dendritic spine density, two key pathological characteristics of schizophrenia. Transcriptome analysis also support the potential role of Sfmbt1 in schizophrenia pathogenesis. The study identifies rs2535629 as a plausibly causal regulatory variant at the 3p21.1 risk locus and demonstrates the regulatory mechanism and biological effect of this functional variant, indicating that this functional variant confers schizophrenia risk by altering CTCF binding and regulating expression of SFMBT1, a distal gene which plays important roles in neurodevelopment and synaptic morphogenesis.