According to A.T. Beck and colleagues' cognitive formulation of poor functioning in schizophrenia, maladaptive cognitive appraisals play a key role in the expression and persistence of negative symptoms and associated real-world functioning deficits. They provided initial support for this model by showing that dysfunctional attitudes are elevated in schizophrenia and account for significant variance in negative symptoms and subjective quality of life. The current study used structural equation modeling to further evaluate the contribution of dysfunctional attitudes to outcome in schizophrenia. One hundred eleven outpatients and 67 healthy controls completed a Dysfunctional Attitudes Scale, and patients completed a competence measure of functional capacity, clinical ratings of negative symptoms, and interview-based ratings of real-world functioning. Patients reported higher defeatist performance beliefs than controls and these were significantly related to lower functional capacity, higher negative symptoms, and worse community functioning. Consistent with Beck and colleagues' formulation, modeling analyses indicated a significant indirect pathway from functional capacity → dysfunctional attitudes → negative symptoms → real-world functioning. These findings support the value of dysfunctional attitudes for understanding the determinants of outcome in schizophrenia and suggest that therapeutic interventions targeting these attitudes may facilitate functional recovery. © 2009.