Background and Purpose: Improvement of cognitive deficits in schizophrenia remains an unmet need due to the lack of new therapies and drugs. Recent studies have reported that fingolimod, an immunomodulatory drug for treating multiple sclerosis, demonstrates anti-inflammatory and neuroprotective effects in several neurological disease models. This suggests its usefulness for ameliorating cognitive dysfunction in schizophrenia. Herein, we assessed the efficacy profile and mechanism of fingolimod in a rat model of phencyclidine (PCP)-induced schizophrenia. Experimental Approach: Sprague-Dawley rats were treated with PCP for 14 days. The therapeutic effect of fingolimod on cognitive function was assessed using the Morris water maze and fear conditioning tests. Hippocampal neurogenesis and the expression of astrocytes and microglia were evaluated by immunostaining. Cytokine expression was quantified using multiplexed flow cytometry. Brain-derived neurotrophic factor expression and phosphorylation of extracellular signal-regulated kinase were determined using western blot analysis. Key Results: Fingolimod attenuated cognitive deficits and restored hippocampal neurogenesis in a dose-dependent manner in PCP-treated rats. Fingolimod treatment exerted anti-inflammatory effects by inhibiting microglial activation and IL-6 and IL-1β pro-inflammatory cytokine expression. The underlying mechanism involves the upregulation of brain-derived neurotrophic factor protein expression and activation of the extracellular signal-regulated kinase signalling pathway. Conclusion and Implications: To the best of our knowledge, this is the first preclinical study to assess the effects of fingolimod on cognitive function in schizophrenia models. Our results support the role of the immune system in cognitive alterations in schizophrenia and highlight the potential of immunomodulatory strategies to improve cognitive deficits in schizophrenia.