To date, no measures are available that permit differentiation of discrete, clinically distinct subtypes of schizophrenia (SZ) with potential differential underlying pathophysiologies. Over recent years, there has been increasing recognition that SZ is heterogeneously associated with deficits in early auditory processing (EAP), as demonstrated using clinically applicable tasks such as tone-matching task (TMT). Here, we pooled TMT performances across 310 SZ individuals and 219 healthy controls (HC), along with clinical, cognitive, and resting-state functional-connectivity MRI (rsFC-MRI) measures. In addition, TMT was measured in a group of 24 patients at symptomatic clinical high risk (CHR) for SZ and 24 age-matched HC (age range 7-27 years). We provide the first demonstration that the EAP deficits are bimodally distributed across SZ subjects (P < 0.0001 vs. unimodal distribution), with one group showing entirely unimpaired TMT performance (SZ-EAP+), and a second showing an extremely large TMT impairment (SZ-EAP-), relative to both controls (d = 2.1) and SZ-EAP+ patients (d = 3.4). The SZ-EAP- group predominated among samples drawn from inpatient sites, showed higher levels of cognitive symptoms (PANSS), worse social cognition and a differential deficit in neurocognition (MATRICS battery), and reduced functional capacity. rsFC-MRI analyses showed significant reduction in SZ-EAP- relative to controls between subcortical and cortical auditory regions. As opposed to SZ, CHR patients showed intact EAP function. In HC age-matched to CHR, EAP ability was shown to increase across the age range of vulnerability preceding SZ onset. These results indicate that EAP measure segregates between discrete SZ subgroups. As TMT can be readily implemented within routine clinical settings, its use may be critical to account for the heterogeneity of clinical outcomes currently observed across SZ patients, as well as for pre-clinical detection and efficacious treatment selection.