Neurocognitive deficits are believed to be important predictors of functional outcome in chronic psychotic disorders, but few supporting studies have utilized prospective designs and adequate control. The aim of this study was to estimate the relative influence of symptoms and neurocognitive deficits on the development of social behavior skills in a cohort of individuals with schizophrenia or schizoaffective disorder recovering from acute symptom exacerbations. Forty-six individuals were recruited upon discharge from an inpatient unit and completed assessments of symptoms, neurocognitive function, and social behavior at 3-month intervals for 1 year. Correlational analyses and random regression models were used to model social behavioral capacities longitudinally. Social behavior improved modestly (10% improvements in ratings) over the follow-up period for the group as a whole. Disorganized and negative symptoms, as well as neurocognitive deficits in short-term and working memory predicted changes in social behavior over time. Individuals with better working memory function showed significantly greater abilities to recover social behavior skills, whereas those with working memory deficits showed no functional improvement over time. Both symptoms and neurocognitive deficits are important determinants of functional outcome in schizophrenia. It is proposed that clinicians should consider neurocognitive thresholds for treatment response when developing rehabilitation plans.