BACKGROUND: Urban-rural differences in schizophrenia risk have been widely evidenced across Western countries. However, explanation of these differences is lacking. We aimed to identify contextual risk factors for schizophrenia that explain urban-rural differences in schizophrenia risk. METHODS: Utilizing Danish population-based registers, we partitioned Denmark into 1885 geographic neighborhoods homogeneously sized in terms of population. Information on the entire Danish population from 1981 to 2016 was used to quantify a spectrum of neighborhood-level domains. We subsequently conducted multilevel survival analyses following persons born in Denmark from 1971 to 1982 for the development of schizophrenia allowing for clustering of people within neighborhoods. We used this method to tease apart the effects of individual, specific, and general contextual risk factors for schizophrenia. RESULTS: A significant general contextual effect in schizophrenia risk across neighborhoods was estimated (Medium Incidence Rate Ratio (MRR):1.41; 95% CI:1.35-1.48). Most of the specific contextual factors examined were associated with schizophrenia risk. For instance, neighborhood-level proportion of lone adult households (Incidence Rate Ratios (IRR):1.53; 95% CI:1.44-1.63) had largest risk estimate. Adjustment for all individual-level and specific contextual constructs reduced the IRR for urbanicity from 1.98 (95% CI:1.77-2.22) to 1.30 (95% CI:1.11-1.51). CONCLUSIONS: In the largest prospective multilevel survival analyses of schizophrenia risk conducted to date, multiple neighborhood-level characteristics were associated with raised schizophrenia risk, with these contextual factors explaining most of the elevated risk linked with urbanicity. However, the unexplained heterogeneity that was evident in our multilevel models indicates that our understanding of the role of urbanicity in schizophrenias etiology remains incomplete.