Disrupted-In-Schizophrenia-1 (DISC1) is a promising susceptibility gene for major mental illness, but the mechanism of the clinical association is unknown. We searched for DISC1 transcripts in adult and fetal human brain and tested whether their expression is altered in patients with schizophrenia and is associated with genetic variation in DISC1. Many alternatively spliced transcripts were identified, including groups lacking exon 3 (Delta3), exons 7 and 8 (Delta7Delta8), an exon 3 insertion variant (extra short variant-1, Esv1), and intergenic splicing between TSNAX and DISC1. Isoforms Delta7Delta8, Esv1, and Delta3, which encode truncated DISC1 proteins, were expressed more abundantly during fetal development than during postnatal ages, and their expression was higher in the hippocampus of patients with schizophrenia. Schizophrenia risk-associated polymorphisms [non-synonymous SNPs rs821616 (Cys704Ser) and rs6675281 (Leu607Phe), and rs821597] were associated with the expression of Delta3 and Delta7Delta8. Moreover, the same allele at rs6675281, which predicted higher expression of these transcripts in the hippocampus, was associated with higher expression of DISC1Delta7Delta8 in lymphoblasts in an independent sample. Our results implicate a molecular mechanism of genetic risk associated with DISC1 involving specific alterations in gene processing.