Olanzapine, a thienobenzodiazepine derivative, is a second generation (atypical) antipsychotic agent which has proven efficacy against the positive and negative symptoms of schizophrenia. Compared with conventional antipsychotics, it has greater affinity for serotonin 5-HT2A than for dopamine D2 receptors. In large, well controlled trials in patients with schizophrenia or related psychoses, olanzapine 5 to 20 mg/day was significantly superior to haloperidol 5 to 20 mg/day in overall improvements in psychopathology rating scales and in the treatment of depressive and negative symptoms, and was comparable in effects on positive psychotic symptoms. The 1-year risk of relapse (rehospitalisation) was significantly lower with olanzapine than with haloperidol treatment. In the first double-blind comparative study (28-week) of olanzapine and risperidone, olanzapine 10 to 20 mg/day proved to be significantly more effective than risperidone 4 to 12 mg/day in the treatment of negative and depressive symptoms but not on overall psychopathology symptoms. In contrast, preliminary results from an 8-week controlled study suggested risperidone 2 to 6 mg/day was superior to olanzapine 5 to 20 mg/day against positive and anxiety/depressive symptoms (p < 0.05), although consistent with the first study, both agents demonstrated similar efficacy on measures of overall psychopathology. Improvements in general cognitive function seen with olanzapine treatment in a 1-year controlled study of patients with early-phase schizophrenia, were significantly greater than changes seen with either risperidone or haloperidol. However, preliminary results from an 8-week trial showed comparable cognitive enhancing effects of olanzapine and risperidone treatment in patients with schizophrenia or schizoaffective disorder. Several studies indicate that olanzapine has benefits against symptoms of aggression and agitation, while other studies strongly support the effectiveness of olanzapine in the treatment of depressive symptomatology. Olanzapine is associated with significantly fewer extrapyramidal symptoms than haloperidol and risperidone. In addition, olanzapine is not associated with a risk of agranulocytosis as seen with clozapine or clinically significant hyperprolactinaemia as seen with risperidone or prolongation of the QT interval. The most common adverse effects reported with olanzapine are bodyweight gain, somnolence, dizziness, anticholinergic effects (constipation and dry mouth) and transient asymptomatic liver enzyme elevations. In comparison with haloperidol, the adverse events reported significantly more frequently with olanzapine in > or = 3.5% of patients were dry mouth, bodyweight gain and increased appetite and compared with risperidone, only bodyweight gain occurred significantly more frequently with olanzapine. The high acquisition cost of olanzapine is offset by reductions in other treatment costs (inpatient and/or outpatient services) of schizophrenia. Pharmacoeconomic analyses indicate that olanzapine does not significantly increase, and may even decrease, the overall direct treatment costs of schizophrenia, compared with haloperidol. Compared with risperidone, olanzapine has also been reported to decrease overall treatment costs, despite the several-fold higher daily acquisition cost of the drug. Olanzapine treatment improves quality of life in patients with schizophrenia and related psychoses to a greater extent than haloperidol, and to broadly the same extent as risperidone. Olanzapine demonstrated superior antipsychotic efficacy compared with haloperidol in the treatment of acute phase schizophrenia, and in the treatment of some patients with first-episode or treatment-resistant schizophrenia. The reduced risk of adverse events and therapeutic superiority compared with haloperidol and risperidone in the treatment of negative and depressive symptoms support the choice of olanzapine as a first-line option in the management of schizophrenia in the acute phase and for the maintenance of treatment response.