BACKGROUND: Psychotic disorders are characterized by prominent deficits in associative learning and memory for which there are currently no effective treatments. Functional magnetic resonance imaging (fMRI) studies in psychotic disorders have identified deficits in fronto-temporal activation during associative learning and memory. The underlying pathology of these findings remains unclear. Postmortem data have suggested these deficits may be related to loss of muscarinic M1 receptor mediated signaling. This is supported by an in-vivo study showing improvements in these symptoms after treatment with the experimental M1/4 receptor agonist xanomeline. The current study tests whether reported deficits in fronto-temporal activation could be mediated by loss of M1 receptor signaling in psychotic disorders. METHODS: Twenty-six medication-free subjects diagnosed with a psychotic disorder and 29 age-, gender-, and IQ-matched healthy controls underwent two functional magnetic resonance imaging (fMRI) sessions, one under placebo and one under selective M1 antagonist biperiden, while performing the paired associated learning task. M1 binding potentials (BPND) were measured in the dorsolateral prefrontal cortex (DLPFC) and hippocampus using 123I-IDEX single photon emission computed tomography. RESULTS: In the subjects with psychotic disorders DLPFC hypoactivation was only found in the memory phase of the task. In both learning and memory phases of the task, M1 antagonism by biperiden elicited significantly greater hyperactivation of the parahippocampal gyrus and superior temporal gyrus in subjects with a psychotic disorders compared to controls. Greater hyperactivation of these areas after biperiden was associated with greater hippocampal M1 receptor binding during learning, with no association found with M1 receptor binding in the DLPFC. M1 receptor binding in the DLPFC was related to greater functional sensitivity to biperiden of the cingulate gyrus during the memory phase. CONCLUSION: The current study is the first to show differences in M1 receptor mediated functional sensitivity between subjects with a psychotic disorder and controls during a paired associate learning and memory task. Results point to subjects with psychotic disorders having a loss of M1 receptor reserve in temporal-limbic areas.