Carefully designed animal models of genetic risk factors are likely to aid our understanding of the pathogenesis of schizophrenia. Here, we study a mouse strain with a truncating lesion in the endogenous Disc1 ortholog designed to model the effects of a schizophrenia-predisposing mutation and offer a detailed account of the consequences that this mutation has on the development and function of a hippocampal circuit. We uncover widespread and cumulative cytoarchitectural alterations in the dentate gyrus during neonatal and adult neurogenesis, which include errors in axonal targeting and are accompanied by changes in short-term plasticity at the mossy fiber/CA3 circuit. We also provide evidence that cAMP levels are elevated as a result of the Disc1 mutation, leading to altered axonal targeting and dendritic growth. The identified structural alterations are, for the most part, not consistent with the growth-promoting and premature maturation effects inferred from previous RNAi-based Disc1 knockdown. Our results provide support to the notion that modest disturbances of neuronal connectivity and accompanying deficits in short-term synaptic dynamics is a general feature of schizophrenia-predisposing mutations.