Schizophrenia and psychotic bipolar disorder are debilitating mental illnesses characterized by diffuse emotional and cognitive impairment in many domains of mental function. One of the most pressing needs in psychiatry is the development of procedures to aid in the differential diagnosis of these two disorders at early stages. Accumulating evidence suggests that a cardinal abnormality in schizophrenia is aberrant connections between brain regions (i.e., functional connectivity). Aberrant functional connectivity has been observed in frontal and temporal lobes in schizophrenia during performance of target detection of low probability events. Patients with bipolar illness show impairments in multiple frontal circuits, basal ganglia, parietal cortex and cerebellum during target detection but show greater activity in temporal lobe regions compared to patients with schizophrenia. These results suggest psychotic bipolar illness may be associated with aberrant functional connectivity between frontal, striatal, and temporal lobe circuits - but in a pattern opposite to that observed in schizophrenia. The present proposal seeks to test the hypothesis that event related potential (ERP) topography, patterns of hemodynamic activity, and measures of functional connectivity, will reliably differentiate patients with schizophrenia from patients with psychotic bipolar illness during performance of target detection. High temporal resolution electrophysiological techniques and high spatial resolution hemodynamic imaging will be used to map the functional neural architecture associated with target detection. Independent Component Analyses will be used to examine the patterns of aberrant functional connectivity. Patients with clear diagnoses of schizophrenia or psychotic bipolar illness will be studied during the first week of a relapsing psychotic episode and again at 3 months and at 6 months postepisode. The longitudinal design will permit evaluation of state and trait markers of the two disorders. It is hypothesized that patients with schizophrenia will be reliably differentiated from patients with psychotic bipolar illness based on the pattern of hemodynamics and functional connectivity measures in frontal, temporal and subcortical structures. This work will be an important step in developing procedures to aid in the differential diagnosis of schizophrenia or psychotic bipolar illness at early stages of the disorder. The data also will permit an examination of psychotic symptoms (i.e., disorganization, reality distortion, and psychomotor poverty) associated with electrophysiological and hemodynamic measures of brain function.