This study compared the effects of olanzapine (OLZ) with those of quetiapine (QUE) for improving negative symptoms in patients diagnosed with schizophrenia or schizoaffective disorder who had prominent negative symptoms and marked deficits in social or occupational functioning. In this 6-month, multicenter, double-blind clinical trial, patients were randomized to treatment with OLZ (n = 171, 10-20 mg/d) or QUE (n = 175, 300-700 mg/d). Patients were treated at community mental health centers and assigned case managers who developed individualized psychosocial treatment plans. The primary efficacy measure was the reduction in negative symptoms using the Scale for the Assessment of Negative Symptoms. Secondary measures assessed changes in functioning, psychopathology, and treatment tolerability. Treatment with OLZ or QUE led to a significant reduction in negative symptoms, with no between-group difference (P = 0.09). Both treatment groups also showed significant improvement on most efficacy measures. Olanzapine-treated patients showed significantly greater improvement on positive symptoms and on several measures of functioning including Global Assessment of Functioning Scale, Quality of Life Instrumental Role domain, and level of effort in psychosocial or occupational rehabilitation programs. Significantly more OLZ-treated patients completed the study (52.6% OLZ, 37.7% QUE, P = 0.007). Treatment differences in safety were relatively small and not thought to be clinically relevant. Patients with schizophrenia who manifest prominent negative symptoms and marked functional deficits demonstrated significant improvement in negative symptoms after treatment with OLZ or QUE. Greater improvement in positive symptoms and a greater study completion rate may hold relevance to enhanced functional outcomes observed after OLZ therapy.