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Substance use disorders occur commonly in patients with schizophrenia and dramatically worsen their overall clinical course. While the exact mechanisms contributing to substance use in schizophrenia are not known, a number of theories have been put forward to explain the basis of the co-occurrence of these disorders. We propose here a unifying hypothesis that combines recent evidence from epidemiological and genetic association studies with brain imaging and pre-clinical studies to provide an updated formulation regarding the basis of substance use in patients with schizophrenia. We suggest that the genetic determinants of risk for schizophrenia (especially within neural systems that contribute to the risk for both psychosis and addiction) make patients vulnerable to substance use. Since this vulnerability may arise prior to the appearance of psychotic symptoms, an increased use of substances in adolescence may both enhance the risk for developing a later substance use disorder, and also serve as an additional risk factor for the appearance of psychotic symptoms. Future studies that assess brain circuitry in a prospective longitudinal manner during adolescence prior to the appearance of psychotic symptoms could shed further light on the mechanistic underpinnings of these co-occurring disorders while identifying potential points of intervention for these difficult-to-treat co-occurring disorders.