Schizophrenia-spectrum disorders have been associated with heightened stress sensitivity, which can worsen prognosis, functioning, and quality of life. However, more research is needed to determine whether different types of stress impact specific functional domains. This study used the Psychological Stress Index (PSI)-a self-report instrument designed and validated to measure perceived stress in psychosis-to delineate the unique contribution of social versus non-social stress to social functioning and social cognition. Fifty-nine participants with schizophrenia/schizoaffective disorder and fifty non-clinical controls completed the PSI and a battery of social functioning and social cognition measures. Elevated social stress statistically predicted worse performance on an emotion recognition task and worse interviewer-rated social functioning, over-and-above non-social stress. Higher social stress also statistically predicted worse interviewer-rated social functioning over-and-above performance on emotion recognition and theory-of-mind tasks. These results provide promising evidence that examining social stress separately from non-social stress provides unique information about social difficulties in schizophrenia-spectrum psychopathology. Examining social stress and other specific forms of stress may improve understanding of stress sensitivity in this population and better inform treatments aimed at improving functioning.