Evidence suggests that complex interactions between the immune system and brain have important etiological and therapeutic implications in schizophrenia. However, the detailed cellular and molecular basis of immune dysfunction in schizophrenia remains poorly characterized. To better understand the immune changes and molecular pathways, we systemically compared the cytokine responses of peripheral blood mononuclear cells (PBMCs) derived from patients with schizophrenia and controls against bacterial, fungal, and purified microbial ligands, and identified aberrant cytokine response patterns to various pathogens, as well as reduced cytokine production after stimulation with muramyl dipeptide (MDP) in schizophrenia. Subsequently, we performed single-cell RNA sequencing on unstimulated and stimulated PBMCs from patients and controls and revealed widespread suppression of antiviral and inflammatory programs as well as impaired chemokine/cytokine-receptor interaction networks in various immune cell subpopulations of schizophrenic patients after MDP stimulation. Moreover, serum MDP levels were elevated in these patients and correlated with the course of the disease, suggesting increased bacterial translocation along with disease progression. In vitro assays revealed that MDP pretreatment altered the functional response of normal PBMCs to its re-stimulation, which partially recapitulated the impaired immune function in schizophrenia. In conclusion, we delineated the molecular and cellular landscape of impaired immune function in schizophrenia, and proposed a mutual interplay between innate immune impairment, reduced pathogen clearance, increased MDP translocation along schizophrenia development, and blunted innate immune response. These findings provide new insights into the pathogenic mechanisms that drive systemic immune activation, neuroinflammation, and brain abnormalities in schizophrenia.