Despite evidence for a role of the dopamine system in the pathophysiology of schizophrenia, there has not been substantial evidence that this disorder originates from a pathological change within the dopamine system itself. Current data from human imaging studies and preclinical investigations instead point to a disruption in afferent regulation of the dopamine system, with a focus on the hippocampus. We found that the hippocampus in the methylazoxymethanol acetate (MAM) rodent developmental disruption model of schizophrenia is hyperactive and dysrhythmic, possibly due to loss of parvalbumin interneurons, leading to a hyperresponsive dopamine system. Whereas current therapeutic approaches target dopamine receptor blockade, treatment at the site of pathology may be a more effective therapeutic avenue. This model also provided insights into potential means for prevention of schizophrenia. Specifically, given that stress is a risk factor in schizophrenia, and that stress can damage hippocampal parvalbumin interneurons, we tested whether alleviating stress early in life can effectively circumvent transition to schizophrenia-like states. Administering diazepam prepubertally at an antianxiety dose in MAM rats was effective at preventing the emergence of the hyperdopaminergic state in the adult. Moreover, multiple stressors applied to normal rats at the same time point resulted in pathology similar to the MAM rat. These data suggest that a genetic predisposition leading to stress hyper-responsivity, or exposure to substantial stressors, could be a primary factor leading to the emergence of schizophrenia later in life, and furthermore treating stress at a critical period may be effective in circumventing this transition.