Dysregulation of the Mirror Neuron System (MNS) in schizophrenia (SCZ) may underlie the cognitive and behavioral manifestations of social dysfunction associated with that disorder. In healthy subjects intranasal (IN) oxytocin (OT) improves neural processing in the MNS and is associated with improved social cognition. OT's brain effects can be measured through its modulation of the MNS by suppressing EEG mu-band electrical activity (8-13Hz) in response to motion perception. Although IN OT's effects on social cognition have been tested in SCZ, OT's impact on the MNS has not been evaluated to date. Therefore, we designed a study to investigate the effects of two different OT doses on biological motion-induced mu suppression in SCZ and healthy subjects. EEG recordings were taken after each subject received a single IN administration of placebo, OT-24IU and OT-48IU in randomized order in a double-blind crossover design. The results provide support for OT's regulation of the MNS in both healthy and SCZ subjects, with the optimal dose dependent on diagnostic group and sex of subject. A statistically significant response was seen in SCZ males only, indicating a heightened sensitivity to those effects, although sex hormone related effects cannot be ruled out. In general, OT appears to have positive effects on neural circuitry that supports social cognition and socially adaptive behaviors.