Regulation of interpersonal distance or "personal space" (PS; the space near the body into which others cannot intrude without eliciting discomfort) is a largely unconscious channel of non-verbal social communication used by many species including humans. PS abnormalities have been observed in neuropsychiatric illnesses, including schizophrenia. However, the neurophysiological basis of these abnormalities remains unknown. To investigate this question, in this study, functional magnetic resonance imaging (fMRI) data were collected while individuals with psychotic disorders (PD; n = 37) and demographically-matched healthy control (HC) subjects (n = 60) viewed images of faces moving towards or away from them. Responses of a frontoparietal-subcortical network of brain regions were measured to the approaching versus the withdrawing face stimuli, and resting-state fMRI data were also collected. PS size was measured using the classical Stop Distance Procedure. As expected, the PD group demonstrated a significantly larger PS compared to the HC group (P = 0.002). In both groups, a network of parietal and frontal cortical regions showed greater approach-biased responses, whereas subcortical areas (the striatum, amygdala and hippocampus) showed greater withdrawal-biased responses. Moreover, within the PD (but not the HC) group, approach-biased activation of the inferior parietal cortex (IPC) and functional connectivity between the IPC and the ventral/limbic striatum were significantly correlated with PS size. This study provides evidence that PS abnormalities in psychotic illness involve disrupted function and connectivity of the PS network. Such brain-behavior relationships may serve as objective treatment targets for novel interventions for schizophrenia and related psychotic illnesses.