Emotion perception deficits have been well documented in schizophrenia. However, very little is known about decoding of emotion cues in daily communication in this clinical group. The aim of the current study is to examine whether patients with schizophrenia experience difficulties in decoding other people's emotional cues, such as prosody, in daily conversations. Eighteen patients with schizophrenia and nineteen matched controls were administrated an emotion and intention identification task in a series of conversations with a prosody manipulation and a questionnaire that specifically captured subjective experiences of pleasure. Compared with the healthy controls, the patients with schizophrenia exhibited a chance-level performance in emotion identification in the presence of negative prosody. These findings suggest that patients with schizophrenia have a specific deficit in recognizing negative emotion in conversation.