Impaired working memory (WM) function in schizophrenia has been associated with abnormal activation of the dorsolateral prefrontal cortex (DLPFC). It is, however, not clear whether abnormal activation is a sign of DLPFC pathology, or a correlate of poor performance. We address this question by examining activity in the WM brain system at different levels of task difficulty. A parametric fMRI paradigm is used to examine how the WM system responds to increasing load. A parametric fMRI design with four levels of a spatial N-back task was used to examine the relationships between working memory load, functional output (performance) and brain activity in 10 schizophrenic patients on atypical antipsychotic medication and to compare these to 10 healthy controls. In spite of increasingly poor performance in schizophrenic patients, activity increased normally in DLPFC and inferior parietal cortex bilaterally and in anterior cingulate, with increasing load. At 3-back, activity dropped in DLPFC in comparison with controls, but not in the other regions. The results indicate that peak activation of the WM-system is reached at a lower processing load in schizophrenic patients than in healthy controls. As a decline of DLPFC activity at high processing loads in itself is not abnormal, WM dysfunction in schizophrenia appears to be the result of an impaired functional output of the whole WM system, causing elevation of the effective burden imposed by WM tasks.