Schizophrenic (n = 24) and manic (n = 20) inpatients were compared with a normal comparison sample (n = 10) on memory and encoding performance for both self- and other-generated speech. It was found that the level of encoding, as indexed by the level of organization present in the recalled speech, predicted memory performance for both schizophrenic and normal samples. Schizophrenics were less effective at encoding than normals, although the relationship between level of encoding and memory performance was similar for both samples. For the manic patients, however, clinically rated thought disorder predicted memory performance better than encoding performance. It appeared that thought disorder specifically disrupted recall performance, with less of an effect on encoding. These relationships, as well as the lack of a significant relationship between thought disorder and task performance in the schizophrenics, are discussed in terms of their implications for later research in the area of information processing in psychotic patients.