Objective This cross-sectional study explored the relationships between daily activity performance, attention, memory, executive functions and community functioning in people with schizophrenia. More specifically, this study attempted to verify the hypothesis that functional limitations in the performance of daily activities negatively affect community functioning in people with schizophrenia. Methods Eighty-two individuals with schizophrenia living in the community were recruited for the study. The Perceive, Recall, Plan and Perform (PRPP) System of Task Analysis was used to assess participants’ functional capacity during a meal preparation task. Visuo-spatial associative memory, spatial working memory, planning, visuo-motor coordination, and selective attention were evaluated as well. Community functioning was assessed with the Independent Living Skills Survey (ILSS) and the Multnomah Community Ability Scale (MCAS). Results Correlations revealed significant associations between functional capacity and visuo-spatial associative learning, spatial working memory, planning and negative symptoms. Planning skills during meal preparation were found to be associated with MCAS. After regression analyses, only visuo-spatial memory, negative symptoms, education and familiarity with meal preparation explained variation in functional capacity. Conclusions The findings of the current study suggest that visuo-spatial associative learning, negative symptoms, education and familiarity with task are among the important factors for functional capacity. Planning skills necessary for efficient task performance were also found to be those most determinant for community functioning. Rehabilitation interventions should consider these underlying strength and deficits when developing strategies to help people with schizophrenia build functional skills essential for community living.