Participation in work or school activity is an important aspect of social functioning in individuals with a recent onset of psychosis. We measured the predictors of occupational status 6 months following hospitalization in a sample of 71 adults with recent onset affective or non-affective psychosis. At baseline, participants were evaluated with cognitive measures including the Wisconsin Card Sorting Test, symptom rating scales, the Modified Vocational Index to assess occupational status, and other clinical and demographic measures. At follow-up, occupational status was re-assessed and categorized as whether or not the patient had any current work or school activity. Results of a backwards stepwise logistic regression examining occupational status at follow-up yielded a significant model with the following independent predictors: a higher baseline level of cognitive functioning as measured by performance on the Wisconsin Card Sorting Test lower level of baseline depression as measured by the Calgary Depression Scale; and better socioeconomic status as measured by level of maternal education. Cognitive functioning, but not psychosis severity, is a significant independent predictor of occupational status early in the course of psychotic illness.