In this paper we propose a novel theoretical framework, which was previously developed for major depression and bipolar disorder, namely the compensatory immune-regulatory reflex system (CIRS), as applied to the neuro-immune pathophysiology of schizophrenia and its phenotypes, including first episode psychosis (FEP), acute relapses, chronic and treatment resistant schizophrenia (TRS), comorbid depression, and deficit schizophrenia. These schizophrenia phenotypes and manifestations are accompanied by increased production of positive acute phase proteins, including haptoglobin and α2-macroglobulin, complement factors, and macrophagic M1 (IL-1β, IL-6 and TNF-α), T helper (Th)-1 (interferon-γ and IL-2R), Th-2 (IL-4, IL-5), Th-17 (IL-17) and T regulatory (Treg; IL-10 and transforming growth factor (TGF)-β1) cytokines, cytokine-induced activation of the tryptophan catabolite (TRYCAT) pathway as well as chemokines, including CCL-11 (eotaxin), CCL-2, CCL-3 and CXCL-8. While the immune profiles in the different schizophrenia phenotypes indicate activation of the immune-inflammatory response system (IRS), there are simultaneous signs of CIRS activation, including increased levels of the IL-1 receptor antagonist (sIL-1RA), sIL-2R and tumor necrosis factor-a receptors, Th-2 and Treg phenotypes with increased IL-4 and IL-10 production, and increased levels of TRYCATs and haptoglobin, α2-macroglobulin and other acute phase reactants, which have immune-regulatory and anti-inflammatory effects. Signs of activated IRS and CIRS pathways are also detected in TRS, chronic and deficit schizophrenia indicating that these conditions are accompanied by a new homeostatic setpoint between upregulated IRS and CIRS components. In FEP, increased baseline CIRS activity is a protective factor which may predict favorable clinical outcomes. Moreover, impairments in the CIRS are associated with deficit schizophrenia and greater impairments in semantic and episodic memory. It is concluded that CIRS plays a key role in the pathophysiology of schizophrenia by negatively regulating the primary IRS and contributing to recovery from the acute phase of illness. Components of the CIRS may offer promising therapeutic targets for schizophrenia.