Background Social cognitive deficits contribute to functional disability in schizophrenia. Social cognitive tasks in healthy persons consistently evoke activation of medial prefrontal cortex, inferior frontal gyrus, temporoparietal gyrus, and posterior cingulate cortex/precuneus. We tested the hypothesis that patients with schizophrenia and their unaffected siblings share dysfunction of the same neural networks. Methods Neural activation during emotion processing (EP), theory of mind (ToM), and control tasks was measured using functional magnetic resonance imaging (fMRI) in 14 patients with schizophrenia, 14 nonpsychotic siblings of patients with schizophrenia, and 14 matched healthy subjects. Results Compared with healthy controls, patients with schizophrenia showed reduced activation of right hemisphere structures involved in EP and ToM including inferior frontal gyrus, middle frontal gyrus, and right temporoparietal junction. These deficits were shared, in part, by unaffected siblings. The latter group demonstrated deficits in bilateral precuneus activation during ToM, not present in patients. Conclusions Schizophrenia appears to be associated with a deficit in activation of right hemisphere components of a ToM network. Such deficits are shared in part by those at high genetic risk but unaffected by schizophrenia.