The natural history of schizophrenia remains unclear. One strategy to further inform this area is to prospectively evaluate individuals early in the course of the disorder, both in terms of symptomatic and psychosocial/occupational functioning. Subjects were recruited into the study if they were in the midst of their first psychiatric hospitalization for a non-'organic' psychotic disorder. Subjects were extensively evaluated at index with semi-structured interviews including the Comprehensive Assessment of Symptoms and History (CASH), and followed at 6-month intervals. Data are presented on 35 subjects who were followed through 1 year. There was a significant improvement in overall symptomatology during index hospitalization, but this was accounted for primarily by improvement of positive symptoms, with negative symptoms remaining prominent. No further improvement was noted between discharge and 1-year follow-up in any of the symptom measures. Employment, interpersonal relationships, and sexual activity remained markedly impaired throughout the follow-up period. These data demonstrate that; (1) negative symptoms are prominent and stable early in the course of the disorder; (2) symptom severity at discharge from index hospitalization is predictive of symptom severity at 1 year; and (3) despite substantial overall symptomatic improvement during the first hospitalization, psychosocial and occupational functioning were found to be markedly impaired at 1-year follow-up.