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Growing evidence suggests that testosterone may play a role in the pathophysiology of schizophrenia given that testosterone has been linked to cognition and negative symptoms in schizophrenia. Here, we determine the extent to which serum testosterone levels are related to neural activity in affective processing circuitry in men with schizophrenia. Functional magnetic resonance imaging was used to measure blood-oxygen-level-dependent signal changes as 32 healthy controls and 26 people with schizophrenia performed a facial emotion identification task. Whole brain analyses were performed to determine regions of differential activity between groups during processing of angry versus non-threatening faces. A follow-up ROI analysis using a regression model in a subset of 16 healthy men and 16 men with schizophrenia was used to determine the extent to which serum testosterone levels were related to neural activity. Healthy controls displayed significantly greater activation than people with schizophrenia in the left inferior frontal gyrus (IFG). There was no significant difference in circulating testosterone levels between healthy men and men with schizophrenia. Regression analyses between activation in the IFG and circulating testosterone levels revealed a significant positive correlation in men with schizophrenia (r=.63, p=.01) and no significant relationship in healthy men. This study provides the first evidence that circulating serum testosterone levels are related to IFG activation during emotion face processing in men with schizophrenia but not in healthy men, which suggests that testosterone levels modulate neural processes relevant to facial emotion processing that may interfere with social functioning in men with schizophrenia.