Verbal memory deficits are arguably the most common cognitive abnormalities in biological relatives of schizophrenia patients. Because verbal memory is a complex cognitive function, it is necessary to differentiate its intact and compromised aspects in order to reveal aberrant neural systems that reflect genetic risk in relatives of schizophrenia patients. Using an experimental verbal memory task, we examined encoding, free-recall, repetition priming, and recognition of verbal material in 22 schizophrenia patients, 22 first-degree biological relatives of schizophrenia patients, and 23 nonpsychiatric control participants. Schizophrenia patients exhibited intact repetition priming, but worse size judgment task performance (encoding), recall, and recognition than the control participants. Biological relatives of schizophrenia patients exhibited intact size judgment task performance, repetition priming, and recognition, but a free-recall deficit. Although size judgment task performance at encoding was associated with recall of verbal material in schizophrenia and control groups, in the relative group encoding performance was associated with the degree of repetition priming. Findings are consistent with impaired explicit recollection of verbal material, but intact implicit verbal memory in schizophrenia patients and biological relatives of schizophrenia patients.