BACKGROUND: Structural brain abnormalities in schizophrenia are well replicated; many emerge before the onset of illness and are present in relatives who remain well. Structural changes in bipolar disorder are less clearly established. The possibility that structural abnormalities might provide a means by which the disorders might be separated is one that has attracted limited research effort. This study sought to examine these issues and clarify the associations of phenotypic expression and genetic liability. METHODS: Forty-nine control subjects, 71 patients, and 72 unaffected relatives were recruited for the study. Patients included those with schizophrenia from families affected by schizophrenia alone, those with bipolar disorder from families affected by bipolar disorder alone, and those with bipolar disorder from families affected by both bipolar disorder and schizophrenia. Unaffected relatives were recruited from the families of the three patient groups. Subjects underwent a magnetic resonance imaging scan of the brain, which was analyzed with a grey-matter-optimized, voxel-based morphometry technique. RESULTS: Compared with control subjects, all patient and relative groups showed evidence of reduced anterior thalamic gray matter. Reductions in middle prefrontal gyrus and dorsomedial thalamus were specific to participants with schizophrenia. CONCLUSIONS: Whereas prefrontal and dorsomedial thalamic gray matter reductions seem to be specific to schizophrenia, anterior thalamic reductions seem to be a marker of liability to psychosis in general. These results are discussed in the context of their functional role and in terms of their connections with other cortical and subcortical structures.