In 47 tertiary inpatients with schizophrenia or schizoaffective disorder, we report on the extent to which everyday cognition (EC), as represented by tasks utilizing naturalistic stimuli or commonly encountered problems, accounts for variation in daily functioning. Patients underwent interview-based measures of psychiatric symptoms, nurses' observations of functioning, and measures of EC and traditional cognition (TC). Our results indicate that EC accounts for "real-world" functioning above that of TC and psychiatric symptoms. This observation supports the utility of incorporating salient measures that rely upon common experience and accumulated knowledge structure into existent test batteries.