Blunted and exaggerated neuronal response to rewards are hypothesized to be core features of schizophrenia spectrum disorders (SZ) and bipolar disorder (BD), respectively. Nonetheless, direct tests of this hypothesis, in which response between SZ and BD is compared in the same study, are lacking. Here we examined the functional correlates of reward processing during the Incentivized Control Engagement Task (ICE-T) using 3T fMRI. Reward-associated activation was examined in 49 healthy controls (HCs), 52 recent-onset individuals with SZ, and 22 recent-onset individuals with Type I BD using anterior cingulate (ACC), anterior insula, and ventral striatal regions of interest. Significant group X reward condition (neutral vs. reward) interactions were observed during reward anticipation in the dorsal ACC (F(2,120) = 4.21, P = 0.017) and right insula (F(2,120) = 4.77, P = 0.010). The ACC interaction was driven by relatively higher activation in the BD group vs. HCs (P = 0.007) and vs. individuals with SZ (P = 0.010). The insula interaction was driven by reduced activation in the SZ group relative to HCs (P = 0.018) and vs. people with BD (P = 0.008). A composite of reward anticipation-associated response across all associated ROIs also differed significantly by diagnosis (F(1,120) = 5.59, P = 0.02), BD > HC > SZ. No effects of group or group X reward interactions were observed during reward feedback. These results suggest that people with SZ and BD have opposite patterns of activation associated with reward anticipation but not reward receipt. Implications of these findings in regard to Research Domain Criteria-based classification of illness and the neurobiology of reward in psychosis are discussed.