The aim of the present study was to assess the efficacy and safety of olanzapine in the treatment of schizophrenic patients. 27 patients were randomly assigned to treatment with olanzapine or haloperidol over 12 weeks. The primary efficacy measure was the mean change from baseline to endpoint in total scores on the Brief Psychiatric Rating Scale (BPRS) and assessing treatment emergent adverse events. Secondary measures were positive symptoms, negative symptoms, general psychopathology depression, anxiety and quality of life. Compared to haloperidol, olanzapine had equal effect in improving overall psychopathology, positive symptoms, and severity of schizophrenic illness. Olanzapine showed supehor improvement on negative symptoms and secondary depressive features. Commonest side effects were weight gain, sleepiness and increased duration of sleep. Olanzapine is effective in improving overall psychopathology including positive symptoms, negative and secondary depressive features in Indian patients with schizophrenia and it is safe and well tolerated at dosage between 5 to 20 mg/day.