//.NET1.1 code
/// 
/// Methode to validate XML File
/// 
/// This method expects input XML as string
/// Path to schema file
/// true if xml is validated else false
private bool ValidateXmlUsingXsd(string XmlData,String SchemaPath)
{
XmlValidatingReader v = new XmlValidatingReader(XmlData, XmlNodeType.Document, null);
v.ValidationType = ValidationType.Schema; 
v.ValidationEventHandler +=
new ValidationEventHandler(MyValidationEventHandler);

while (v.Read())
{
// Can add code here to process the content.
}
v.Close();

return isValid;

}
/// 
/// This event handler is called only when a validation error occurs
/// 
/// 
/// 
public static void MyValidationEventHandler(object sender,
ValidationEventArgs args)
{
//these two variables should be initialized as class level variables
isValid = false;
errorMessage = "Validation event\n" + args.Message;

}
/// 
/// Method to get XML in a string from an XML file
/// 
/// 
/// 
private string GetStringFromXML(string fileName)
{
StreamReader rd = new StreamReader(fileName);
string str = rd.ReadToEnd();
rd.Close();
return str;
}

Calling the method :
bool valid = ValidateXmlUsingXsd(str, txtXSD.Text);

//.NET2.0 code
private bool ValidateXmlUsingXsd2(string XmlData,String SchemaPath)
{
XmlReaderSettings settings = new XmlReaderSettings();
settings.ValidationType = ValidationType.Schema;
settings.Schemas.Add(null, SchemaPath); 
settings.ValidationFlags = XmlSchemaValidationFlags.ReportValidationWarnings; 
settings.ValidationEventHandler += new ValidationEventHandler(ValidationCallBack);

StringReader xmlStream = new StringReader(XmlData);
XmlReader reader = XmlReader.Create(xmlStream, settings);
while (reader.Read()) ;

return isValid; 
}

private static void ValidationCallBack(object sender, ValidationEventArgs e)
{
isValid = false;
errorMessage = "Validation Error: " + e.Message;
}