The central goals of this manuscript are (1) to better characterize what appears to be the most parsimonious account of schizophrenic long-term memory impairment in the neuropsychological literature: a contextual binding deficit rooted in the medial temporal lobes; (2) to link this deficit to concrete abnormalities at the level of the hippocampus; and (3) to suggest that this deficit could lead to the functional impairment experienced by schizophrenia patients in their daily lives. As far as long-term memory is concerned in schizophrenia, there seems to be a general agreement to conclude that explicit mechanisms are disturbed compared to relatively spared implicit mechanisms. More precisely, both subsystems of explicit memory (i.e., episodic and semantic) appear to be dysfunctional in this patient population. Errors during the encoding processes could be responsible for this dysfunction even if retrieval per se is not totally spared. Recently, a number of studies have suggested that impairments in conscious recollection and contextual binding are closely linked to episodic memory deficit. Since the hippocampal formation is considered to be the central element in the neural support for contextual binding and episodic memory, we have conducted an extensive review of the literature concerning the hippocampal formation in schizophrenia. Emerging evidence from varying disciplines confirm the coherence of the different anomalies reported concurrently at the neuroanatomical, neurodevelopmental, biochemical, and genetic levels. It seems highly probable that the synaptic disorganization in the hippocampus concerns the regions crucial for encoding and contextual binding memory processes. The consequences of these deficits could result in schizophrenia patients experiencing major difficulties when facing usual events which have not been encoded with their proper context.