The effects of task demands and stimulus probability on the N1 and P2 components of the auditory event-related potential (ERP) to non-target stimuli were investigated in normal and medicated schizophrenic subjects. Subjects either read a book while tones were presented, or counted the rare (low probability) tones in an auditory oddball paradigm. The mismatch negativity to rare tones in the reading condition was present, and did not differ between groups. N1 amplitude was smaller in schizophrenic patients in all conditions. When subjects counted the rare tones, the amplitude and latency of P2 increased. This task-related effect on P2 was much greater in control than in schizophrenic subjects. Difference ERPs were used to better characterize the effect of task demands by subtracting the ERP in the reading condition from the ERP in the counting condition. The difference ERP consisted of a negative deflection at 182 ms, and a positive deflection at 276 ms, which were both reduced in schizophrenic subjects. N2 and P3 amplitude to target stimuli were reduced in patients as well, but these abnormalities were uncorrelated with N1 and P2 abnormalities to non-target stimuli. Despite automatic registration of stimulus mismatch, and normal processing speed, patients showed deficient task-related modulation of processing to both non-target and target stimuli. Reduction of N1 amplitude in schizophrenia occurs regardless of task demands, and may reflect a chronic, early-stage disturbance in information processing.