Impairments in social cognition and interactions are core psychopathologies in schizophrenia, often manifesting as an inability to appropriately relate to the intentions and feelings of others. Neuroimaging has helped to demarcate the dynamics of two distinct functional connectivity circuits underlying the social-affective processes related to mentalization (known as Theory of Mind, ToM) and somatic-affiliation (known as Embodied Simulation, ES). While evidence points to abnormal activation patterns within these networks among those suffering from schizophrenia, it is yet unclear however, if these patients exhibit this abnormal functional connectivity in the context of social-affective experiences. The current fMRI study, investigated functional connectivity dynamics within ToM and ES networks as subjects experienced evolving cinematic portrayals of fear. During scanning, schizophrenia patients and healthy controls passively watched a cinematic scene in which a mother and her son face various threatening events. Participants then provided a continuous and retrospective report of their fear intensity during a second viewing outside the scanner. Using network cohesion index (NCI) analysis, we examined modulations of ES-related and ToM-related functional connectivity dynamics and their relation to symptom severity and the continuous emotional ratings of the induced cinematic fear. Compared to patients, healthy controls showed higher ES-NCI and marginally lower ToM-NCI during emotional peaks. Cross-correlation analysis revealed an intriguing dynamic between NCI and the inter-group difference of reported fear. Schizophrenia patients rated their fear as lower relative to healthy controls, shortly after exhibiting lower ES connectivity. This increased difference in rating was also followed by higher ToM connectivity among schizophrenia patients. The clinical relevance of these findings is further highlighted by the following two results: (a) ToM-NCI was found to have a strong correlation with the severity of general symptoms during one of the two main emotional peaks (Spearman R = 0.77); and (b) k-mean clustering demonstrated that the networks' NCI dynamic during the social-affective context reliably differentiated between patients and controls. Together, these findings point to a possible neural marker for abnormal social-affective processing in schizophrenia, manifested as the disturbed balance between two functional networks involved in social-affective affiliation. This in turn suggests that exaggerated mentalization over somatic-affiliative processing, in response to another's' distress may underlie social-affective deficits in schizophrenia.