Psychosis and visual hallucinations (VH) in Parkinson's disease (PD) substantially impact patient outcomes, yet the underlying neural mechanisms remain unclear, limiting effective treatments. Here we used dynamic causal modeling to leverage the fast temporal dynamics captured with electroencephalography data during a visual mismatch negativity task in people with PD with (N = 20) and without (N = 18) VH to examine effective connectivity. We found reduced top-down and enhanced bottom-up connectivity in ventral visual and prefrontal regions during task performance in PD-VH, suggesting deficits in sensory prediction updating and an overreliance on visual input. Connectivity patterns differed with hallucination complexity, with complex VH being associated with altered top-down and bottom-up right-hemisphere connectivity, and multimodal hallucinations to more widespread bilateral disruption. Increased task activity, as computed with source reconstruction, correlated positively with normative serotonergic 5-HT2A receptor distribution. These findings highlight specific neural targets for early therapeutic interventions, supporting a transdiagnostic computational architecture of hallucinations.