using System;
using System.Xml;
using System.Xml.Schema;
using System.IO;

public class Sample
{

    public static void Main()
    {
        using (TextReader xmlSchema = new StringReader(AppDomain.CurrentDomain.BaseDirectory+"Shema.xsd"))
        {
            using (XmlReader schemaReader = XmlReader.Create(xmlSchema))
            {
                // Create the XmlSchemaSet class.
                XmlSchemaSet sc = new XmlSchemaSet();

                // Add the schema to the collection.
                sc.Add("", schemaReader);

                // Set the validation settings.
                XmlReaderSettings settings = new XmlReaderSettings();
                settings.ValidationType = ValidationType.Schema;
                settings.Schemas = sc;
                settings.ValidationType = ValidationType.Schema; 
                settings.ValidationEventHandler += new ValidationEventHandler(ValidationCallBack);

                using (TextReader xmlText = new StringReader(AppDomain.CurrentDomain.BaseDirectory + "1.xml"))
                {
                    // Create the XmlReader object.
                    using (XmlReader reader = XmlReader.Create(xmlText, settings))
                    {
                        // Parse the file. 
                        while (reader.Read()) ;
                    }
                }
            }
        }
    }

    // Display any validation errors.
    private static void ValidationCallBack(object sender, ValidationEventArgs e)
    {
        Console.WriteLine("Validation Error: {0}", e.Message);
    }
}

<?xml version="1.0" encoding="windows-1251"?>
<?FORM version="0.1"?>
<REPORT>
    ...
</REPORT>

<?xml version="1.0" encoding="windows-1251"?>
<?FORM version="0.1"?>
<xsd:schema xmlns:xsd="http://www.w3.org/2001/XMLSchema">  
    <xsd:element name="REPORT" type="ReportType"/>
    ...
</xsd:schema>

 sc.Add(null, AppDomain.CurrentDomain.BaseDirectory + "Shema.xsd");

XmlReader reader = XmlReader.Create(AppDomain.CurrentDomain.BaseDirectory + "1.xml", settings))