Social cognition in young relatives of schizophrenia probands (N=70) and healthy controls (N=63) was assessed using the Penn Emotion Recognition Test-40 to examine the presence of social cognitive deficits in individuals at risk for the disorder. Measures of neurocognitive function and prodromal psychopathology were collected to assess the cognitive and clinical correlates of social cognitive impairments in at-risk relatives. Results indicated that when compared with healthy controls, individuals at familial high risk for schizophrenia were significantly more likely to overattribute emotions to neutral faces, with such individuals frequently misinterpreting neutral faces as negative. In addition, at-risk individuals had significantly greater reaction times when completing emotion recognition tasks, regardless of valence. Impairments in neurocognition were largely independent of social cognitive performance, and emotion recognition impairments persisted after adjusting for deficits in neurocognitive function. Further, social cognitive impairments in the interpretation of neutral faces were significantly associated with greater positive and general prodromal psychopathology, whereas neurocognitive impairments were only associated with disorganization. These results suggest that impairments in social cognition may be unique endophenotypes for schizophrenia.