Introduction Apathy has been repeatedly highlighted as a core component of negative symptoms especially with regard to functional outcome of schizophrenia. The purpose of this study was to explore the relationships between apathy, cognitive deficits, and psychosocial functioning in chronic patients with schizophrenia. Methods Thirty-six chronic patients with schizophrenia and an equal number of matched healthy participants were assessed with the clinician version of Apathy Evaluation Scale (AES-C) along with a comprehensive battery of neuropsychological measures. Functioning was assessed with the Personal and Social Performance scale (PSP) and other symptoms were measured with the Positive and Negative Syndrome Scale and the Calgary Depression Scale for Schizophrenia. Results Apathy was strongly and specifically associated with poorer performance on executive tests in patient group. AES-C was significantly correlated with PSP total score as well as its subscales for social useful activities, personal and social relationships, and self-care. Multiple regression analysis revealed that apathy was the most robust predictor of current psychosocial functioning, accounting for 70% of the variance in functioning, independently of co-existent cognitive deficits. Moreover, executive dysfunction did not predict functional impairment, independently of the effect of apathy. Conclusion Our findings confirm that apathy has a stronger relationship to functional impairment than cognitive deficits on a cross-sectional basis in schizophrenia. Moreover, they suggest that apathy and executive dysfunction might represent different manifestations of the same syndrome, probably sharing a common neural substrate.