Schizophrenia (SZ) is a disorder associated with dysfunction of the neural substrate involved in lexical processing, the superior temporal lobe (STL). We examined whether the detrimental effects of lexical competition on word identification are exaggerated in SZ. The results showed that SZ patients were less able than controls to identify words coming from high lexical competitor environments (i.e., high density and high frequency lexical neighborhoods). They did not differ from controls, however, in identifying words coming from low lexical competitor environments (i.e., low density and low frequency lexical neighborhoods). Further, when SZ patients misidentified high competitor words, the erroneously reported words were of a significantly higher frequency than those reported by controls when they misidentified high competitor words (i.e., the HF misidentification bias). Identification accuracy for high competitor words negatively correlated with amount of thought disorder, and the HF misidentification bias positively correlated with the lifetime frequency and severity of auditory hallucinations, the latter of which serving as presumed independent measures of STL dysfunction in SZ.