Recent findings have linked impairments in social performance among individuals with schizophrenia to deficits in cognition. However, one component of cognition, thought disorder (TD), has received little attention in its association with social functioning. The current investigation examined the cross-sectional and predictive relationships between bizarre-idiosyncratic thought and psychosocial functioning throughout the early course of schizophrenia and compared these relationships to those observed among individuals with affective disorders (i.e.,bipolar disorder, manic type, and major depression without psychotic features). Participants were assessed on TD, work, and social functioning using standardized procedures across three follow-ups over an 8-year period. The cross-sectional relationships between TD and impairment in work performance were generally significant. TD also significantly predicted subsequent work functioning years later. Less support was found for the relationship between TD and social functioning. Finally, the relationship between TD and work performance appeared to be more consistent over time for the subjects with schizophrenia compared to those with affective disorders. The results suggest that techniques which minimize TD may have implications for occupational functioning among persons with chronic psychiatric disorders.