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Social cognition and learning potential have been proposed as mediating variables between neurocognition and functional outcome in schizophrenia. The present study examined this relation in a schizophrenia group (N= 26) with normal IQ. Neurocognition was measured with a composite score from tests of verbal learning, psychomotor speed, and executive functioning. Functional outcome was defined as social problem-solving skills and assessed with a role-play test. Social cognition was indexed by tests of visual and auditory emotion perception; and learning potential by estimating a gain score using a triple administration of the WCST. Neurocognition was confirmed to be a strong predictor of social problem-solving, and emotion perception was related to both neurocognition and social problem-solving. When controlling for emotion perception, the association between neurocognition and social problem-solving was weakened, implying a mediating role of emotion perception. Learning potential was not significantly related to neurocognition or social problem-solving, and thus not found to mediate the studied relation. In conclusion, our study indicates that emotion perception is a mediator between neurocognition and functional outcome as assessed with a social problem-solving task and thus a key factor in understanding functional outcome of schizophrenia. (JINS, 2008, 14, 279–288.) [ABSTRACT FROM AUTHOR]