The purpose of the study was to examine the relationship between social anxiety and social functioning in first episode psychosis, and to determine whether those with psychosis have any maladaptive or irrational beliefs regarding social situations. A sample of 60 first episode patients (41 males, 19 females) participated in the study. The presence of social phobia was determined using the Structured Clinical Interview for DSM-IV (SCID-I). Measures included The Social Phobia and Anxiety Inventory (SPAI), the Social Functioning Scale (SFS), the Quality of Life Scale (QLS) and the Social Interaction Self-Statement Test. Thirty-two percent of the sample met SCID-I criteria for social phobia and approximately 60% of participants were experiencing elevated levels of social anxiety according to the SPAI (M=69.57, S.D.=27.42). Results were that negative symptoms and negative self-statements, but not social anxiety, were significant predictors of social functioning. This has implications for addressing these negative cognitions in early psychosis.