Objective: To determine, in a large, multiethnic/multiracial, prospective inception cohort of patients with systemic lupus erythematosus (SLE), the frequency, attribution, clinical, and autoantibody associations with lupus psychosis and the short- and long-term outcomes as assessed by physicians and patients. Methods: Patients were evaluated annually for 19 neuropsychiatric (NP) events including psychosis. Scores on the Systemic Lupus Erythematosus Disease Activity Index 2000, the Systemic Lupus International Collaborating Clinics/American College of Rheumatology Damage Index, and the Short Form 36 (SF-36) were recorded. Time to event and linear regressions were used as appropriate. Results: Of 1,826 SLE patients, 88.8% were female and 48.8% were Caucasian. The mean ± SD age was 35.1 ± 13.3 years, the mean ± SD disease duration was 5.6 ± 4.2 months, and the mean ± SD follow-up period was 7.4 ± 4.5 years. There were 31 psychotic events in 28 of 1,826 patients (1.53%), and most patients had a single event (26 of 28 [93%]). In the majority of patients (20 of 25 [80%]) and events (28 of 31 [90%]), psychosis was attributed to SLE, usually either in the year prior to or within 3 years of SLE diagnosis. Positive associations (hazard ratios [HRs] and 95% confidence intervals [95% CIs]) with lupus psychosis were previous SLE NP events (HR 3.59 [95% CI 1.16–11.14]), male sex (HR 3.0 [95% CI 1.20–7.50]), younger age at SLE diagnosis (per 10 years) (HR 1.45 [95% CI 1.01–2.07]), and African ancestry (HR 4.59 [95% CI 1.79–11.76]). By physician assessment, most psychotic events resolved by the second annual visit following onset, in parallel with an improvement in patient-reported SF-36 summary and subscale scores. Conclusion: Psychosis is an infrequent manifestation of NPSLE. Generally, it occurs early after SLE onset and has a significant negative impact on health status. As determined by patient and physician report, the short- and long-term outlooks are good for most patients, although careful follow-up is required.