Recent behavioral and neuroimaging studies have suggested multisensory processing deficits in patients with schizophrenia (SCZ). Thus far, the neural mechanisms underlying these deficits are not well understood. Previous studies with unisensory stimulation have shown altered neural oscillations in SCZ. As such, altered oscillations could contribute to aberrant multisensory processing in this patient group. To test this assumption, we conducted an electroencephalography (EEG) study in 15 SCZ and 15 control participants in whom we examined neural oscillations and event-related potentials (ERPs) in the sound-induced flash illusion (SIFI). In the SIFI multiple auditory stimuli that are presented alongside a single visual stimulus can induce the illusory percept of multiple visual stimuli. In SCZ and control participants we compared ERPs and neural oscillations between trials that induced an illusion and trials that did not induce an illusion. On the behavioral level, SCZ (55.7%) and control participants (55.4%) did not significantly differ in illusion rates. The analysis of ERPs revealed diminished amplitudes and altered multisensory processing in SCZ compared to controls around 135 ms after stimulus onset. Moreover, the analysis of neural oscillations revealed altered 25–35 Hz power after 100 to 150 ms over occipital scalp for SCZ compared to controls. Our findings extend previous observations of aberrant neural oscillations in unisensory perception paradigms. They suggest that altered ERPs and altered occipital beta/gamma band power reflect aberrant multisensory processing in SCZ.