Cortico-striato-thalamic (CST) systems are anatomical substrates for many motor and executive functions and are implicated in diverse neuropsychiatric disorders. Electrophysiological studies in rats, monkeys and patients with Parkinson's disease have shown that power and coherence of low frequency oscillations in CST systems can be profoundly modulated by dopaminergic drugs. We combined functional MRI with correlational and path analyses to investigate functional and effective connectivity, respectively, of a prefronto-striato-thalamic system activated by object location learning in healthy elderly human subjects (n = 23; mean age = 72 years). Participants were scanned in a repeated measures, randomized, placebo-controlled design to measure modulation of physiological connectivity between CST regions following treatment with drugs which served both to decrease (sulpiride) and increase (methylphenidate) dopaminergic transmission, as well as non-dopaminergic treatments (diazepam and scopolamine) to examine non-specific effects. Functional connectivity of caudate nucleus was modulated specifically by dopaminergic drugs, with opposing effects of sulpiride and methylphenidate. The more salient effect of sulpiride was to increase functional connectivity between caudate and both thalamus and ventral midbrain. A path diagram based on prior knowledge of unidirectional anatomical projections between CST components was fitted satisfactorily to the observed inter-regional covariance matrix. The effect of sulpiride was defined more specifically in the context of this model as increased strength of effective connection from ventral midbrain to caudate nucleus. In short, we have demonstrated enhanced functional and effective connectivity of human caudate nucleus following sulpiride treatment, which is compatible both with the anatomy of ascending dopaminergic projections and with electrophysiological studies indicating abnormal coherent oscillations of CST neurons in parkinsonian states.