The finding that the drug KarXT, a formulation of xanomeline and tropsium which targets muscarinic receptors, has given a positive result in reducing the positive and negative symptoms of schizophrenia in a phase II trial suggests targeting muscarinic receptors is a new approach to treating the disorder. This review will detail the synergistic interplay between studies to understand the role of muscarinic receptors in the aetiology of schizophrenia and drug development and how this has supported the hypothesis that activating the muscarinic M1 and M4 receptors is critical to the efficacy of KarXT, in schizophrenia. The discovery of an intermediate phenotype within schizophrenia which is characterised by the presence of a marked loss of cortical muscarinic M1 receptors will be reviewed. Highlighted will be progress in understanding the biochemistry of that intermediate phenotype and evidence to suggest that those with the intermediate phenotype may resist treatment with agonist to the orthosteric site on the muscarinic M1 and M4 receptor. Finally, the possibility of using drugs targeting the allosteric binding sites on muscarinic receptors to treat schizophrenia will be discussed. This timely review will therefore highlight how research can influence hypothesis driven drug discovery that should produce new treatments for schizophrenia.