The objective of this electrophysiological study was to investigate the processing of semantic coherence during encoding in relation to episodic memory processes promoted at test, in schizophrenia patients, by using the N400 paradigm. Eighteen schizophrenia patients and 15 healthy participants undertook a recognition memory task. The stimuli consisted of pairs of words either semantically related or unrelated to a given category name (context). During encoding, both groups exhibited an N400 external semantic coherence effect. Healthy controls also showed an N400 internal semantic coherence effect, but this effect was not present in patients. At test, related stimuli were accompanied by an FN400 old/new effect in both groups and by a parietal old/new effect in the control group alone. In the patient group, external semantic coherence effect was associated with FN400, while, in the control group, it was correlated to the parietal old/new effect. Our results indicate that schizophrenia patients can process the contextual information at encoding to enhance familiarity process for related stimuli at test. Therefore, cognitive rehabilitation therapies targeting the implementation of semantic encoding strategies can mobilize familiarity which in turn can overcome the recollection deficit, promoting successful episodic memory performance in schizophrenia patients.