Previous work examining the neurobiological substrates of social cognition in healthy individuals has reported modulation of a social cognitive network such that increased activation of the amygdala, fusiform gyrus, and superior temporal sulcus are evident when individuals judge a face to be untrustworthy as compared with trustworthy. We examined whether this pattern would be present in individuals with schizophrenia who are known to show reduced activation within these same neural regions when processing faces. Additionally, we sought to determine how modulation of this social cognitive network may relate to social functioning. Neural activation was measured using functional magnetic resonance imaging with blood oxygenation level dependent contrast in 3 groups of individuals--nonparanoid individuals with schizophrenia, paranoid individuals with schizophrenia, and healthy controls--while they rated faces as either trustworthy or untrustworthy. Analyses of mean percent signal change extracted from a priori regions of interest demonstrated that both controls and nonparanoid individuals with schizophrenia showed greater activation of this social cognitive network when they rated a face as untrustworthy relative to trustworthy. In contrast, paranoid individuals did not show a significant difference in levels of activation based on how they rated faces. Further, greater activation of this social cognitive network to untrustworthy faces was significantly and positively correlated with social functioning. These findings indicate that impaired modulation of neural activity while processing social stimuli may underlie deficits in social cognition and social dysfunction in schizophrenia.