Patients with schizophrenia show impairments in motion processing, along with deficits in lower level processing primarily involving the magnocellular visual pathway. The present study investigates potential magnocellular contributions to impaired motion processing in schizophrenia using a combined neurophysiological and behavioral approach. As compared to prior motion studies in schizophrenia, thresholds were determined for both incoherent and coherent visual motion. In this study, velocity discrimination thresholds were measured for schizophrenia patients (n=14) and age-matched normal control subjects (n=16) using a staircase procedure. Early visual processing was evaluated using steady-state visual evoked potentials (ssVEP), with stimuli biased toward activation of either the magnocellular or parvocellular visual pathways through luminance contrast manipulation. Patients with schizophrenia showed poor velocity discrimination for both incoherent and coherent motion, with no significant group x task interaction. Further, when coherent motion performance was measured at individually determined incoherent motion thresholds, accuracy levels for patients were similar to controls, also indicating similarity of deficit for incoherent vs. coherent motion discrimination. Impairments in velocity discrimination correlated significantly with reduced amplitude of ssVEP elicited by magnocellular -- but not parvocellular -- selective stimuli. This study demonstrates that deficits in motion processing in schizophrenia are significantly related to reduced activation of the magnocellular visual system. Further, this study supports and extends prior reports of impaired motion processing in schizophrenia, and indicates significant bottom-up contributions to higher-order cognitive impairments.