Mismatch negativity (MMN) amplitude is attenuated in schizophrenia patients (SZ). However, variability in illness course among SZ samples and types of deviant stimuli used in MMN paradigms have contributed to inconsistent findings across studies. Though MMN is suggested to be impaired in schizotypy, the potential link between the two is yet to be systematically examined in unaffected first-degree relatives of schizophrenia patients (FDR). The SZ sample had twenty-two drug-naïve or drug-free patients (dSZ) and thirty chronic/medicated patients (cSZ). dSZ and cSZ patients were compared with thirty-six unaffected FDR and thirty-two healthy controls (HC) using a two-tone passive auditory oddball MMN paradigm in an event-related potential experiment with two conditions (presented as separate blocks)–duration-deviant (duration-MMN) and frequency-deviant (frequency-MMN). Schizotypy scores and MMN indices were examined for correlation in FDR. Duration-MMN amplitude was significantly attenuated in both dSZ and cSZ compared to other groups. dSZ and cSZ did not differ on MMN indices. Psychopathology scores and features of illness (illness duration, medication dosage, etc.) did not correlate with MMN indices. In FDR, Schizotypal trait measures did not correlate with MMN indices. Duration-MMN emerged as a more robust indicator of prediction error signalling deficit in SZ. Frequency-MMN amplitude did not significantly differ among the groups, and MMN indices did not correlate with state and trait measures of schizophrenia-related psychopathology. These findings reiterates that auditory sensory processing captured by MMN is likely reflective of dynamic cognitive functions at the point of testing, and is unlikely to be an expression of enduring symptomatology. •Duration-MMN amplitude is attenuated in chronic/medicated (cSZ) and drug-naïve/free (dSZ) schizophrenia patients in comparison to FDR and HC.•Frequency-deviant mismatch negativity (frequency-MMN) amplitude did not significantly differ between the groups.•Duration-MMN and frequency-MMN indices did not significantly differ between medicated/chronic SZ patients and drug-naïve or drug-free/early-course SZ patients.