Dysfunctional auditory sensory processing has generally been found in schizophrenia and it has been suggested that these deficits might be related to clinical and psychosocial variables. The present study included P50 recordings using a simple-paired click auditory evoked potential paradigm in sixty patients with deficit schizophrenia (DS), sixty patients with nondeficit schizophrenia (NDS), and sixty comparison subjects. The Schedule for the Deficit Syndrome was used to categorize patients as DS or NDS. The two patient groups did not differ in clinical variables, except for higher negative dimension and lower community outcome scores in DS than in NDS patients. There were no differences in P50 ratios between deficit and nondeficit subgroups; compared with normal subjects both groups of schizophrenia patients showed impaired P50 ratios (p<0.0001). This ratio appears to be independent of positive and negative symptoms. However, impairment in P50 gating correlated with poorer community outcome. The data document the existence of early auditory sensory processing abnormalities in DS and NDS, and might suggest that common neuronal network abnormalities underlie both forms of schizophrenia. Deficient P50 gating may be associated with impaired functional outcome in schizophrenia.