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Dysfunction of fronto-striato-thalamic (FST) circuits is thought to contribute to dopaminergic dysfunction and symptom onset in psychosis, but it remains unclear whether this dysfunction is driven by aberrant bottom-up subcortical signalling or impaired top-down cortical regulation. We used spectral dynamic causal modelling of resting-state functional MRI to characterize the effective connectivity of dorsal and ventral FST circuits in a sample of 46 antipsychotic-naïve first-episode psychosis patients and 23 controls and an independent sample of 36 patients with established schizophrenia and 100 controls. We also investigated the association between FST effective connectivity and striatal 18F-DOPA uptake in an independent healthy cohort of 33 individuals who underwent concurrent functional MRI and PET. Using a posterior probability threshold of 0.95, we found that midbrain and thalamic connectivity were implicated as dysfunctional across both patient groups. Dysconnectivity in first-episode psychosis patients was mainly restricted to the subcortex, with positive symptom severity being associated with midbrain connectivity. Dysconnectivity between the cortex and subcortical systems was only apparent in established schizophrenia patients. In the healthy 18F-DOPA cohort, we found that striatal dopamine synthesis capacity was associated with the effective connectivity of nigrostriatal and striatothalamic pathways, implicating similar circuits to those associated with psychotic symptom severity in patients. Overall, our findings indicate that subcortical dysconnectivity is evident in the early stages of psychosis, that cortical dysfunction may emerge later in the illness, and that nigrostriatal and striatothalamic signalling are closely related to striatal dopamine synthesis capacity, which is a robust marker for psychosis.