Excitement and controversy have followed neuregulin (NRG1) since its discovery as a putative schizophrenia susceptibility gene; however, the mechanism of action of the associated risk haplotype (HapICE) has not been identified, and specific genetic variations, which may increase risk to schizophrenia have remained elusive. Using a postmortem brain cohort from 37 schizophrenia cases and 37 controls, we resequenced upstream of the type I-IV promoters, and the HapICE repeat regions in intron 1. Relative abundance of seven NRG1 mRNA transcripts in the prefrontal cortex were determined and compared across diagnostic and genotypic groups. We identified 26 novel DNA variants and showed an increased novel variant load in cases compared with controls (χ(2)=7.815; P=0.05). The average nucleotide diversity (θ = 10.0 × 10(-4)) was approximately twofold higher than that previously reported for BDNF, indicating that NRG1 may be particularly prone to genetic change. A greater nucleotide diversity was observed in the HapICE linkage disequilibrium block in schizophrenia cases (θ((case)) = 13.2 × 10(-4); θ((control)) = 10.0 × 10(-4)). The specific HapICE risk haplotype was associated with increased type III mRNA (F = 3.76, P = 0.028), which in turn, was correlated with an earlier age of onset (r = -0.343, P = 0.038). We found a novel intronic five-SNP haplotype ~730 kb upstream of the type I promoter and determined that this region functions as transcriptional enhancer that is suppressed by SRY. We propose that the HapICE risk haplotype increases expression of the most brain-abundant form of NRG1, which in turn, elicits an earlier clinical presentation, thus providing a novel mechanism through which this genetic association may increase risk of schizophrenia.