Working memory deficits are a core feature of schizophrenia. Previous working memory studies suggest a load dependent storage deficit. However, explicit studies of higher executive working memory processes are limited. Moreover, few studies have examined whether subcomponents of working memory such as encoding and maintenance of information are differentially affected by these deficits. Therefore, the aim of the present study was to examine the neural substrates of working memory subprocesses requiring stimulus encoding, maintenance and higher executive processing. Using functional magnetic resonance imaging a modified Sternberg working memory task involving verbal stimulus material was applied. The event-related design enabled the segregation of encoding, active maintenance and executive manipulation of information. Forty-one patients with schizophrenia and 41 healthy subjects were included. Relative to normal controls, schizophrenic patients demonstrated a significantly stronger activation pattern in a fronto-parietal network during executive information manipulation. Additionally, significant relative hypoactivity was detectable in the thalamus. Conversely, during stimulus encoding the patients demonstrated lower activation relative to controls in the prefrontal cortex and the anterior cingulate gyrus. The present findings indicate a pronounced prefrontal functional hyperactivation within the neural network subserving higher executive working memory control processes in schizophrenia. Moreover, they suggest that these altered activations during executive control are related to a preceding abnormality of information encoding. During encoding, a reduced activation in mainly dorsolateral prefrontal and anterior cingulate regions was observed. These results could be explained by increased top-down control processing from prefrontal cortex as a compensation for functional deficits occurring during encoding.