Early formulations of schizophrenia suggested that the disorder involves a loss of ability to form integrated ideas about oneself, others, and the world, resulting in reductions in complex goal-directed behaviors. Exploring this position, the current review describes evidence that persons with schizophrenia experience decrements in their ability to form complex ideas about themselves and to ultimately use that knowledge to respond to psychological and social challenges. Studies are detailed that find greater levels of these impairments, defined as metacognitive deficits, in persons with schizophrenia in both early and later phases of illness as compared with other clinical and community groups. Furthermore, studies linking metacognitive deficits with poorer psychosocial functioning and other variables closely linked to outcomes are summarized. Clinical implications are also discussed.