Abstract Background Abnormalities in language processing and the related brain structures have been reported in people with schizophrenia. It has been proposed that the brain pathways for language processing are anomalous in these individuals and form the underlying basis for the positive symptoms of the illness. If language pathway abnormalities can be detected early in people at high-risk for schizophrenia prior to the onset of symptoms, early treatment can ensue. Methods Fifteen young adults at high genetic risk for developing schizophrenia were compared with 15 of their siblings with schizophrenia or schizoaffective disorder and 15 age and sex matched individuals at low risk for schizophrenia using a visual lexical decision task during fMRI. The data were analyzed by contrasting activation obtained during a real word–pseudoword discrimination task to activation obtained during a nonlinguistic discrimination task, and the differential activations were examined. Results Patterns of brain activation while reading and discriminating between real and pseudowords differed across groups, with more bilateral activation in schizophrenia patients and their high-risk siblings than controls. In control subjects discrimination of words from psuedowords significantly activated Brodmann's area 44 more strongly than when non-linguistic symbols were discriminated. However, high-risk subjects and their siblings with schizophrenia activated this region similarly for both language and non-language tasks. Conclusions Normal individuals can be distinguished from subjects at high genetic risk for schizophrenia and patients with schizophrenia by their more lateralized and stronger activation of Brodmann's area 44 to word compared with symbol discrimination tasks. Thus, evaluation of language processing by fMRI may be a valuable tool for use in the prediction of individual risk for developing schizophrenia.