Human genetic studies have recently suggested that the postsynaptic activity-regulated cytoskeleton-associated protein (Arc) complex is a convergence signal for several genes implicated in schizophrenia. However, the functional significance of Arc in schizophrenia-related neurobehavioral phenotypes and brain circuits is unclear. Here, we find that, consistent with schizophrenia-related phenotypes, disruption of Arc in mice produces deficits in sensorimotor gating, cognitive functions, social behaviors, and amphetamine-induced psychomotor responses. Furthermore, genetic disruption of Arc leads to concomitant hypoactive mesocortical and hyperactive mesostriatal dopamine pathways. Application of a D1 agonist to the prefrontal cortex or a D2 antagonist in the ventral striatum rescues Arc-dependent cognitive or psychomotor abnormalities, respectively. Our findings demonstrate a role for Arc in the regulation of dopaminergic neurotransmission and related behaviors. The results also provide initial biological support implicating Arc in dopaminergic and behavioral abnormalities related to schizophrenia.