Cognitive control, a set of functions that develop throughout adolescence, is important in the pathogenesis of psychotic disorders. Whether cognitive control has a role in conferring vulnerability for the development of psychotic illness is still unknown. The aim of this study was to investigate the neural systems supporting cognitive control in individuals deemed to be potentially prodromal for psychotic illness. We recruited 56 participants at clinical high-risk (CHR) for psychosis based on the Structured Interview for Psychosis-Risk Syndromes (SIPS) and 49 healthy controls. Twelve of the CHR participants eventually developed psychosis. We compared functional magnetic resonance imaging (fMRI) BOLD signal during the performance of the Simon task. We tested for differences between CHR individuals and controls in conflict-related functional activity. In the CHR group when compared with controls, we detected smaller conflict-related activations in several cortical areas, including the Dorsolateral Prefrontal Cortex (DLPFC). Furthermore, conflict-related activations in the DLPFC of those CHR individuals who ultimately developed psychosis (CHR converters) were smaller than in non-converters (CHR non-converters). Higher levels of conflict-related activation were associated with better social and role outcome. Risk for psychosis was associated at the neural level with reduced conflict-related brain activity. This neural phenotype appears correlated within the DLPFC with the development of psychosis and with functional outcome.