Background Cognitive dysfunction is a key predictor of functional disability in schizophrenia. Davunetide (AL-108, NAP) is an intranasally administered peptide currently being developed for treatment of Alzheimer's disease and related disorders. This study investigates effects of davunetide on cognition in schizophrenia. Method Sixty-three subjects with schizophrenia received davunetide at one of two different doses (5, 30mg) or placebo for 12weeks in a multicenter, double-blind, parallel-group randomized clinical trial. The MATRICS Consensus Cognitive Battery (MCCB) assessed cognitive effects. The UCSD Performance-based Skills Assessment (UPSA) and the Schizophrenia Cognition Rating Scale (SCoRS) assessed functional capacity. Subjects continued their current antipsychotic treatment during the trial. Results There were no significant differences in MCCB change between davunetide and placebo over the three treatment arms (p=.45). Estimated effect-size (d) values were .34 and .21 favoring the 5 and 30mg doses vs. placebo, respectively. For UPSA, there was a significant main effect of treatment across study arms (p=.048). Between-group effect size (d) values were.74 and .48, favoring the 5 and 30mg doses, respectively. No significant effects were observed on the SCoRS or on symptom ratings. No significant side effects or adverse events were observed. Conclusion Davunetide was well tolerated. Effects of davunetide on MCCB-rated cognition were not significant relative to placebo. In contrast, a significant beneficial effect was detected for the UPSA. Based upon effect-size considerations, sample sizes of at least 45–50 subjects/group would be required to obtain significant effects on both MCCB and UPSA, providing guidance for continued clinical development in schizophrenia.