Evidence suggests that schizophrenia (ScZ) involves impairments in sensory attenuation. It is currently unclear, however, whether such deficits are present during early-stage psychosis as well as the underlying network and the potential as a biomarker. To address these questions, Magnetoencephalography (MEG) was used in combination with computational modeling to examine M100 responses that involved a “passive” condition during which tones were binaurally presented, while in an “active” condition participants were asked to generate a tone via a button press. MEG data were obtained from 109 clinical high-risk for psychosis (CHR-P) participants, 23 people with a first-episode psychosis (FEP), and 48 healthy controls (HC). M100 responses at sensor and source level in the left and right thalamus (THA), Heschl’s gyrus (HES), superior temporal gyrus (STG) and right inferior parietal cortex (IPL) were examined and dynamic causal modeling (DCM) was performed. Furthermore, the relationship between sensory attenuation and persistence of attenuated psychotic symptoms (APS) and transition to psychosis was investigated in CHR-P participants. Sensory attenuation was impaired in left HES, left STG and left THA in FEP patients, while in the CHR-P group deficits were observed only in right HES. DCM results revealed that CHR-P participants showed reduced top-down modulation from the right IPL to the right HES. Importantly, deficits in sensory attenuation did not predict clinical outcomes in the CHR-P group. Our results show that early-stage psychosis involves impaired sensory attenuation in auditory and thalamic regions but may not predict clinical outcomes in CHR-P participants
