Neural synchrony and functional connectivity are disrupted in schizophrenia. We investigated changes in prefrontal-hippocampal neural dynamics during psychosis-like states induced by the NMDAR antagonist phencyclidine and subsequent rescue by two atypical antipsychotic drugs (AAPDs), risperidone and clozapine, and the classical APD haloperidol. The psychotomimetic effects of phencyclidine were associated with prefrontal hypersynchronization, hippocampal desynchronization, and disrupted circuit connectivity. Phencyclidine boosted prefrontal oscillatory power at atypical bands within delta, gamma, and high frequency ranges, while irregular cross-frequency and spike-LFP coupling emerged. In the hippocampus, phencyclidine enhanced delta rhythms but suppressed theta oscillations, theta-gamma coupling, and theta-beta spike-LFP coupling. Baseline interregional theta-gamma coupling, theta phase coherence, and hippocampus-to-cortex theta signals were redirected to delta frequencies. Risperidone and clozapine, but not haloperidol, reduced phencyclidine-induced prefrontal and cortical-hippocampal hypersynchrony. None of the substances restored hippocampal and circuit desynchronization. These results suggest that AAPDs, but not typical APDs, target prefrontal-hippocampal pathways to elicit antipsychotic action. We investigated whether the affinity of AAPDs for serotonin receptors could explain their distinct effects. Serotonin 5-HT2AR antagonism by M100907 and 5-HT1AR agonism by 8-OH-DPAT reduced prefrontal hypersynchronization. Our results point to fundamentally different neural mechanisms underlying the action of atypical versus typical APDs with selective contribution of serotonin receptors.