The cognitive deficits of schizophrenia have a profound impact on everyday functioning and level of community integration for affected individuals. Cognitive training (CT) interventions may help improve these impairments. We developed and pilot tested a 12-week, group based CT intervention that focused on compensatory strategies and habit learning. Participants were randomly assigned to CT plus standard pharmacotherapy or standard pharmacotherapy (SP) alone and were assessed at baseline, three months (i.e., post-intervention), and at six months. Effect sizes were calculated comparing change in the CT group with change in the SP group. CT had medium to large positive effects on attention, learning, memory, executive functioning, functional capacity, negative symptoms, and subjective quality of life. Most effects became stronger at follow-up, but the effect on negative symptoms was not maintained. Immediately post-treatment, compared with SP subjects, CT participants reported fewer cognitive problems and greater use of cognitive strategies; many of these effects were maintained, but were generally weaker, at six-month follow-up. The initial effect sizes for this compensatory CT intervention suggest that it holds promise for improving cognitive performance, functional capacity, negative symptoms, and quality of life. It is proposed that CT emphasizing habit learning may result in long term changes in ability to function independently in the community.