Neuregulin-1 (Nrg1)/erbB signaling regulates neuronal development, migration, myelination, and synaptic maintenance. The Nrg1 gene is a schizophrenia susceptibility gene. To understand the contribution of Nrg1 signaling to adult brain structure and behaviors, we studied the regulation of type III Nrg1 expression and evaluated the effect of decreased expression of the type III Nrg1 isoforms. Type III Nrg1 is transcribed by a promoter distinct from those for other Nrg1 isoforms and, in the adult brain, is expressed in the medial prefrontal cortex, ventral hippocampus, and ventral subiculum, regions involved in the regulation of sensorimotor gating and short-term memory. Adult heterozygous mutant mice with a targeted disruption for type III Nrg1 (Nrg1(tm1.1Lwr+/-)) have enlarged lateral ventricles and decreased dendritic spine density on subicular pyramidal neurons. Magnetic resonance imaging of type III Nrg1 heterozygous mice revealed hypofunction in the medial prefrontal cortex and the hippocampal CA1 and subiculum regions. Type III Nrg1 heterozygous mice also have impaired performance on delayed alternation memory tasks, and deficits in prepulse inhibition (PPI). Chronic nicotine treatment eliminated differences in PPI between type III Nrg1 heterozygous mice and their wild-type littermates. Our findings demonstrate a role of type III Nrg1 signaling in the maintenance of corticostriatal components and in the neural circuits involved in sensorimotor gating and short-term memory.