Schizophrenia patients exhibit well-documented visual processing deficits. One area of disruption is visual integration, the ability to form global objects from local elements. However, most studies of visual integration in schizophrenia have been conducted in the context of an active attention task, which may influence the findings. In this study we examined visual integration using electroencephalography (EEG) in a passive task to elucidate neural mechanisms associated with poor visual integration. Forty-six schizophrenia patients and 30 healthy controls had EEG recorded while passively viewing figures comprised of real, illusory, or no contours. We examined visual P100, N100, and P200 event-related potential (ERP) components, as well as neural synchronization in the gamma (30-60 Hz) band assessed by the EEG phase locking factor (PLF). The N100 was significantly larger to illusory vs. no contour, and illusory vs. real contour stimuli while the P200 was larger only to real vs. illusory stimuli; there were no significant interactions with group. Compared to controls, patients failed to show increased phase locking to illusory versus no contours between 40-60 Hz. Also, controls, but not patients, had larger PLF between 30-40 Hz when viewing real vs. illusory contours. Finally, the positive symptom factor of the BPRS was negatively correlated with PLF values between 40-60 Hz to illusory stimuli, and with PLF between 30-40 Hz to real contour stimuli. These results suggest that the pattern of results across visual processing conditions is similar in patients and controls. However, patients have deficits in neural synchronization in the gamma range during basic processing of illusory contours when attentional demand is limited.