Studies of established schizophrenia have consistently found that cognitive function predicts social and clinical outcomes. The findings from first-episode studies have been more variable, with only some studies reporting predictive relationships. We tested the possibility that an index of general cognitive ability, IQ, may be a more sensitive and reliable predictor of outcome in first-episode schizophrenia than specific measures of memory and executive function. Fifty-four patients with first-episode schizophrenia or schizoaffective disorder were assessed for cognitive and social function as well as symptoms at three time points over the four years following first presentation of their psychotic illness. Regression analyses were performed to determine whether IQ and specific neuropsychological measures at first episode and one-year follow-up predicted four-year social function and residual symptoms. The effects of premorbid and concurrent IQ on outcome were also assessed. Premorbid IQ and IQ at each assessment significantly predicted social function at four-year follow-up. This relationship remained significant after the social function or symptom scores at first presentation were accounted for in the regression. Specific measures predicted certain domains of social function, but these were weaker and less consistent than IQ. The predictive values of cognition on residual symptoms were less strong; the most consistent finding was a relationship between IQ and the negative syndrome. This study suggests that early in the course of schizophrenia, general cognitive ability, as measured by IQ, is a more sensitive and reliable predictor of functional outcome than measures of specific ability.