Mounting evidence suggests that function and connectivity of the striatum is disrupted in schizophrenia. We have developed a new hypothesis-driven neuroimaging biomarker for schizophrenia identification, prognosis and subtyping based on functional striatal abnormalities (FSA). FSA scores provide a personalized index of striatal dysfunction, ranging from normal to highly pathological. Using inter-site cross-validation on functional magnetic resonance images acquired from seven independent scanners (n = 1,100), FSA distinguished individuals with schizophrenia from healthy controls with an accuracy exceeding 80% (sensitivity, 79.3%; specificity, 81.5%). In two longitudinal cohorts, inter-individual variation in baseline FSA scores was significantly associated with antipsychotic treatment response. FSA revealed a spectrum of severity in striatal dysfunction across neuropsychiatric disorders, where dysfunction was most severe in schizophrenia, milder in bipolar disorder, and indistinguishable from healthy individuals in depression, obsessive-compulsive disorder and attention-deficit hyperactivity disorder. Loci of striatal hyperactivity recapitulated the spatial distribution of dopaminergic function and the expression profiles of polygenic risk for schizophrenia. In conclusion, we have developed a new biomarker to index striatal dysfunction and established its utility in predicting antipsychotic treatment response, clinical stratification and elucidating striatal dysfunction in neuropsychiatric disorders.