Recent studies have indicated that impaired neural circuitry in the prefrontal cortex is a prominent feature of the neuropathology of schizophrenia. Clozapine is one of the most effective antipsychotic drugs used for this debilitating disease. Despite its effectiveness, the mechanism by which clozapine acts on prefrontal cortical circuitry remains poorly understood. In this study, in vitro multiple whole-cell recordings were performed in slices of the ferret prefrontal cortex. Clozapine effectively inhibited the spontaneous synchronized network activities in the prefrontal neurons. It achieved the suppressive effect by decreasing the recurrent excitation among pyramidal neurons and by enhancing the inhibitory inputs onto pyramidal cells through a likely network mechanism. Indeed, under the condition of disinhibition, the depressing effects were reversed and clozapine enhanced the recurrent excitation. These results suggest that the therapeutic actions of clozapine in alleviating the positive symptoms of schizophrenia is achieved, at least partially, through the readjustment of synaptic balance between the excitation and inhibition in the prefrontal cortical circuitry.