BACKGROUND Studies of event-related potentials have consistently shown that schizophrenia is associated with a blunted error-related negativity (ERN), indicating a deficit in error monitoring. It is unknown whether this deficit is unique to schizophrenia or is common to psychotic disorders more broadly, and its associations with clinical characteristics of the illness are not well understood. METHODS The ERN and the error positivity (Pe) were recorded from 33 individuals with schizophrenia, 45 individuals with other psychotic disorders, and 33 healthy control subjects. Patients were drawn from a cohort with psychotic disorders followed since first hospitalization and diagnosed by consensus based on 10 years of observation. RESULTS The ERN was profoundly blunted in the patient group, regardless of diagnosis, indicating that this deficit is not unique to schizophrenia. The Pe, meanwhile, was blunted only among individuals with schizophrenia, indicating that the ERN and Pe are differentially related to psychotic illnesses. A blunted ERN was associated with more severe negative symptoms and poorer real-world functioning, as indicated by unemployment and re-hospitalization over 10 years of illness. Although reduced compared with control subjects, ERN amplitude was greater in patients with higher neuroticism, indicating that error processing is moderated by personality differences in the same manner as in healthy populations. CONCLUSIONS The current study advances the literature by evaluating diagnostic specificity and functional correlates of impaired error processing in psychosis.