Background Oxytocin (OT) is associated with our ability to empathize and has been shown to play a major role in mediating social behaviors within the context of intergroup dynamics. Schizophrenia is associated with impaired empathy, and with a dysfunctional oxytocinergic system. The effect of OT on the empathic responses of patients with schizophrenia within the context of intergroup relationships has not been studied. The present study examined the effect of OT on the patients' empathic responses to pain experienced by in-group, conflictual out-group and neutral out-group members. Method In a double-blind, placebo-controlled, within-subject cross-over design, the responses on the Pain Evaluation Task of 28 male patients with schizophrenia were compared to 27 healthy male controls. All participants received a single intranasal dose of 24 IU OT or placebo, 1 week apart. Results OT induced an empathy bias in the healthy controls towards the conflictual out-group members. Although this effect was absent in the patient group, OT seems to heighten an empathic bias in the patient group towards the in-group members when rating non-painful stimuli. Conclusions The study demonstrates that the administration of OT can result in empathic bias towards adversary out-group members in healthy controls but not in patients with schizophrenia. However, the OT-induced bias in both the patients (in the no-pain condition towards the in-group members) and the healthy controls (in the no-pain and pain conditions towards the adversary out-group) suggests that OT enhances the distinction between conflictual in-group and out-group members.