Transcranial alternating current stimulation (tACS) modulates endogenous neural oscillations in healthy human participants by the application of a low-amplitude electrical current with a periodic stimulation waveform. Yet, it is unclear if tACS can modulate and restore neural oscillations that are reduced in patients with psychiatric illnesses such as schizophrenia. Here, we asked if tACS modulates network oscillations in schizophrenia. We performed a randomized, double-blind, sham-controlled clinical trial to contrast tACS with transcranial direct current stimulation (tDCS) and sham stimulation in 22 schizophrenia patients with auditory hallucinations. We used high-density electroencephalography to investigate if a five-day, twice-daily 10Hz-tACS protocol enhances alpha oscillations and modulates network dynamics that are reduced in schizophrenia. We found that 10Hz-tACS enhanced alpha oscillations and modulated functional connectivity in the alpha frequency band. In addition, 10Hz-tACS enhanced the 40Hz auditory steady-state response (ASSR), which is reduced in patients with schizophrenia. Importantly, clinical improvement of auditory hallucinations correlated with enhancement of alpha oscillations and the 40Hz-ASSR. Together, our findings suggest that tACS has potential as a network-level approach to modulate reduced neural oscillations related to clinical symptoms in patients with schizophrenia.