Chronic macrophage activation with subsequent failure of activated macrophages to properly control T-lymphocyte secretion of interleukin-2 and interleukin-2 receptors is proposed as the basic biological mechanism of schizophrenia. Fundamental to this theory are the clinical observations on interluekin-2 provoking the active phase symptoms of schizophrenia in psychiatrically normal human volunteers and macrophage cytokines producing the prodromal and residual phase symptoms. This theory provides a completely new and unified mechanism for the antipsychotic action of typical and atypical neuroleptics, bromocriptine, naloxone and DMSO. Furthermore, this hypothesis reveals why the dopamine theory of schizophrenia was a false lead. The effects of prolactin, estrogens and androgens are consistent with the model. Age of onset, male/female incidence, course of the disease from prodromal to active to residual phase, the protection afforded by rheumatoid arthritis and the close relationship between depression and schizophrenia can be explained by this theory. The gastrointestinal tract is suggested as the preferred site to investigate for the cause of the immune activation in schizophrenia.