There is considerable evidence implicating the 15q13.3 region in neuropsychiatric disorders, with the α7 nicotinic receptor gene CHRNA7 the most plausible candidate. This region has multiple duplications and many copy number variants (CNVs). A common CNV involves a partial duplication of CHRNA7 (CHRFAM7A), which occurs in either orientation. We examined the distribution of these alternative genomic arrangements in a large cohort of psychiatric patients, their relatives and controls using the 2-bp deletion polymorphism as a marker for the orientation of CHRFAM7A. We investigated three common alleles for association with psychosis and with the P50 sensory gating deficit, which is strongly associated with psychosis and strongly linked to 15q13.3. We found significant within-family association with P50 (empirical P=0.004), which is robust to population stratification. Most of the effect came from the 2-bp deletion allele, which tags the variant of CHRFAM7A in the same orientation as CHRNA7. This allele is associated with the presence of the P50 sensory gating deficit (empirical P=0.0006). Tests comparing within-family and between-family components of association suggest considerable population stratification in the sample. We found no evidence for association with psychosis, but this may reflect lower power using this phenotype. Four out of six previous association studies found association of different psychiatric phenotypes with the same 2-bp deletion allele.