Schizophrenia patients display important rates of comorbid social anxiety disorder (SAD) but few studies have directly examined how SAD affects the presentation of schizophrenia, notably social cognition deficits and functioning. Aims To compare social cognition performance of schizophrenia patients who meet the diagnostic criteria for a comorbid SAD (SZ+) relative to patients without such comorbidity (SZ−) and to determine if the impact of social cognition performance on functioning is moderated by that comorbidity. Method Social cognition performance (emotion recognition, social knowledge, and mentalizing), a control non-social reasoning task, as well as clinical symptoms and functioning were assessed in 26 patients with comorbid SAD (SZ+), 29 SZ− and 84 healthy controls. Results Patient groups significantly differed from each other on social knowledge performance, but not in levels of symptoms or overall functioning. Relative to healthy controls, SZ+ were impaired uniquely on mentalizing, whereas SZ− showed a more encompassing social cognition deficit that included mentalizing, social knowledge and non-social reasoning impairments. Mentalizing was the best predictor of functioning across both patient groups. Importantly, non-social reasoning negatively influenced mentalizing and in turn functioning only in the SZ− group. Conclusions The overall pattern of results indicates common mentalizing deficits in SZ+ and SZ−; however, these deficits appear linked to different underlying deficits and different pathways to functional impact in the two patient subgroups. This study highlights some distinctive characteristics of schizophrenia patients with comorbid SAD and signals a need for further investigations into the sources of the mentalizing and functioning impairments in SZ+ patients.