Reality monitoring impairment is often reported in schizophrenia but the neural basis of this deficit is poorly understood. Difficulties with reality monitoring could be attributable to the same pattern of neural dysfunction as other cognitive deficits that characterize schizophrenia, or might instead represent a separable and dissociable impairment. This question was addressed through direct comparison of behavioral performance and neural activity associated with reality monitoring and working memory in patients with schizophrenia and matched healthy controls. Participants performed a word-pair reality monitoring task and a Sternberg working memory task while undergoing fMRI scanning. Distinct behavioral deficits were observed in the patients during performance of each task, which were associated with separable task- and region-specific dysfunction in the medial anterior prefrontal cortex for reality monitoring and dorsolateral prefrontal cortex for working memory. The results suggest that reality monitoring impairment is a distinct neurocognitive deficit in schizophrenia. The findings are consistent with the presence of a range of dissociable cognitive deficits in schizophrenia which may be associated with variable functional and structural dysconnectivity in underlying processing networks.