Abstract Background: Previous studies have shown abnormal eye gaze perception in schizophrenia, associated with compromised social functioning. However, the neural mechanisms of altered gaze perception in schizophrenia remain unclear, limiting our ability to design effective interventions. This study aims to use dynamic causal modeling (DCM) of functional MRI time-series data to reveal aberrant dynamics between brain regions associated with eye gaze perception in schizophrenia. Methods: Twenty-five patients with schizophrenia or schizoaffective disorder (SZ) and 20 healthy controls (HC) completed a gaze perception task during BOLD fMRI. Participants viewed faces with different gaze angles and decided either the gaze direction (Gaze: “Looking at you?” yes/no) or gender of the face (Gender: male/female). Four nodes were identified as regions of interest for DCM as they showed differential activation between Gaze and Gender: secondary visual cortex (Vis), temporo-parietal junction (TPJ), anterior insula (aIns), and medial prefrontal cortex (mPFC). A bilinear model space was generated with these 4 nodes, as well as visual input of face, self-connections, bidirectional connections between nodes, and modulation of gaze on the connections. Results: Bayesian model selection revealed a winning model, in which Vis showed bottom-up influence on mPFC, which in turn had direct top-down influences on aIns and TPJ and indirect top-down influence on Vis through TPJ; attending to gaze modulated the Vis-mPFC and mPFC-TPJ connections. Group difference was observed in the Gaze modulation on the Vis-mPFC connection, such that attending to gaze inhibited the bottom-up connection from Vis to mPFC but this inhibition was weakened in SZ relative to HC. Conclusion: These findings suggest that when determining the self-referential nature of social information, it is critical to suppress stimulus-driven processing and rely more on conceptually-driven cognition formulated from past experience. A reduced ability to do so may underlie the abnormalities observed in eye gaze perception in schizophrenia.