Impaired facial emotion recognition is a core deficit in schizophrenia. Oxytocin has been shown to improve social perception in patients with schizophrenia; however, the effect of oxytocin on the neural activity underlying facial emotion recognition has not been investigated. This study was aimed to assess the effect of a single dose of intranasal oxytocin on brain activity in patients with schizophrenia using an implicit facial emotion-recognition paradigm. Sixteen male patients with schizophrenia and 16 age-matched healthy male control subjects participated in a randomized, double-blind, placebo-controlled crossover trial at Seoul National University Hospital. Delivery of a single dose of 40 IU intranasal oxytocin and the placebo was separated by 1 week. Drug conditions were compared by performing a region of interest (ROI) analysis of the bilateral amygdala on responses to the emotion recognition test. It was found that nasal spray decreased amygdala activity for fearful emotion and increased activity for happy faces. Further, oxytocin elicited differential effects between the patient and control groups. Intranasal oxytocin attenuated amygdala activity for emotional faces in patients with schizophrenia, whereas intranasal oxytocin significantly increased amygdala activity in healthy controls. Oxytocin-induced BOLD signal changes in amygdala in response to happy faces was related to attachment style in the control group. Our result provides new evidence of a modulatory effect of oxytocin on neural response to emotional faces for patients with schizophrenia. Future studies are needed to investigate the effectiveness of long-term treatment with intranasal oxytocin on neural activity in patients with schizophrenia.