Working memory (WM) deficits predict clinical and functional outcomes in schizophrenia but are poorly understood and unaddressed by existing treatments. WM encoding and WM retrieval have not been investigated in schizophrenia without the confounds of illness chronicity or the use of antipsychotics and illicit substances. Moreover, it is unclear if WM deficits may be linked to cannabinoid 1 receptor dysfunction in schizophrenia. Sixty-six volunteers (35 controls, 31 drug-free patients with diagnoses of schizophrenia or schizoaffective disorder) completed the Sternberg Item-Recognition paradigm during an fMRI scan. Neural activation during WM encoding and WM retrieval was indexed using the blood-oxygen-level-dependent hemodynamic response. A subset of volunteers (20 controls, 20 drug-free patients) underwent a dynamic PET scan to measure [11C] MePPEP distribution volume (ml/cm3) to index CB1R availability. In a whole-brain analysis, there was a significant main effect of group on task-related BOLD responses in the superior parietal lobule during WM encoding, and the bilateral hippocampus during WM retrieval. Region of interest analyses in volunteers who had PET/fMRI indicated that there was a significant main effect of group on task-related BOLD responses in the right hippocampus, left DLPFC, left ACC during encoding; and in the bilateral hippocampus, striatum, ACC and right DLPFC during retrieval. Striatal CB1R availability was positively associated with mean striatal activation during WM retrieval in male patients (R = 0.5, p = 0.02) but not male controls (R = −0.20, p = 0.53), and this was significantly different between groups, Z = −2.20, p = 0.02. Striatal CB1R may contribute to the pathophysiology of WM deficits in male patients and have implications for drug development in schizophrenia.