Postmortem and functional imaging studies of patients with psychiatric disorders, including schizophrenia, are consistent with a dysfunction of interneurons leading to compromised inhibitory control of network activity. Parvalbumin (PV)-expressing, fast-spiking interneurons interacting with pyramidal neurons generate cortical gamma oscillations (30–80 Hz) that synchronize cortical activity during cognitive processing. In postmortem studies of schizophrenia patients, these interneurons show reduced PV and glutamic acid decarboxylase 67 (GAD67), an enzyme that synthesizes GABA, but the consequences of this downregulation are unclear. We developed a biophysically realistic and detailed computational model of a cortical circuit including asynchronous release from GABAergic interneurons to investigate how reductions in PV and GABA affect gamma oscillations induced by sensory stimuli. Networks with reduced GABA were disinhibited and had altered gamma oscillations in response to stimulation; PV-deficient GABA synapses had increased asynchronous release of GABA, which decreased the level of excitation and reduced gamma-band activity. Combined reductions of PV and GABA resulted in a diminished gamma-band oscillatory activity in response to stimuli, similar to that observed in schizophrenia patients. Our results suggest a mechanism by which reduced GAD67 and PV in fast-spiking interneurons may contribute to cortical dysfunction in schizophrenia and related psychiatric disorders.