To determine the clinical relevance of different definitions of symptom remission for prediction of functional outcome in first-episode psychosis (FEP). One hundred forty-one individuals receiving treatment for an FEP at a specialized early intervention service had positive and negative symptoms and functional status rated every month over the first 2 years of treatment using the Scale for the Assessment of Positive Symptoms, Scale for the Assessment of Negative Symptoms, and Social and Occupational Functioning Assessment Scale. Subjects were classified according to 4 definitions of remission varying the criteria for severity (negative symptom inclusion/exclusion) and duration (3/6 mo sustained). Positive symptom remission was achieved by 94% and 84% of subjects for 3 and 6 months, respectively, compared with 70% and 56% for positive and negative symptom remission, respectively. Linear regression analyses showed that only definitions of remission containing both positive and negative symptoms independently predicted functional outcome. This was confirmed by receiver operating characteristic analyses where remission based on positive and negative symptoms was marginally better than positive symptoms alone (difference in area under the curve; z = 1.94, P = .052). There was little difference between a time criterion of remission of positive and negative symptoms of 3 (sensitivity = 100%, specificity = 42%) or 6 (sensitivity = 90%, specificity = 57%) months. Consistent with the consensus definition of remission in schizophrenia, severity of both positive and negative symptoms in defining remission in FEP is necessary although a 3-month criterion had equal predictive validity to the 6-month criterion.