Emerging literature implicates abnormalities in gamma frequency oscillations in the pathophysiology of schizophrenia, with hypofunction of N-methyl-D-aspartate (NMDA) receptors implicated as a key factor. Prepulse inhibition (PPI) is a behavioural measure of sensorimotor gating, which is disrupted in schizophrenia. We studied relationships between ongoing and sensory-evoked gamma oscillations and PPI using pharmacological interventions designed to increase gamma oscillations (ketamine, MK-801); reduce gamma oscillations (LY379268); or disrupt PPI (amphetamine). We predicted that elevating ongoing gamma power would lead to increased 'neural noise' in cortical circuits, dampened sensory-evoked gamma responses and disrupted behaviour. Wistar rats were implanted with EEG recording electrodes. They received ketamine (5 mg/kg), MK-801 (0.16 mg/kg), amphetamine (0.5 mg/kg), LY379268 (3 mg/kg) or vehicle and underwent PPI sessions with concurrent EEG recording. Ketamine and MK-801 increased the power of ongoing gamma oscillations and caused time-matched disruptions of PPI, while amphetamine marginally affected ongoing gamma power. In contrast, LY379268 reduced ongoing gamma power, but had no effect on PPI. The sensory gamma response evoked by the prepulse was reduced following treatment with all psychotomimetics, associating with disruptions in PPI. This was most noticeable following treatment with NMDA receptor antagonists. We found that ketamine and MK-801 increase ongoing gamma power and reduce evoked gamma power, both of which are related to disruptions in sensorimotor gating. This appears to be due to antagonism of NMDA receptors, since amphetamine and LY379268 differentially impacted these outcomes and possess different neuropharmacological substrates. Aberrant gamma frequency oscillations caused by NMDA receptor hypofunction may mediate the sensory processing deficits observed in schizophrenia.