A large body of evidence demonstrated the presence of cognitive deficits in schizophrenia and schizophrenia-spectrum disorders. Such dysfunctions are also reported in mood disorders, although the results are conflicting as to the severity of the impairment and the involved cognitive domains. Only a few studies compared the profile and severity of cognitive deficits in psychotic and mood disorders, especially during phases of clinical stability. In subjects with schizophrenia, as compared to those with other syndromes, cognitive deficits are more frequent, severe and stable over time; furthermore, they present a lower association with symptoms, clinical phase and drug treatment. Several studies reported that cognitive deficits have a greater impact on real-life functioning than symptoms. Furthermore, there are evidences that cognitive impairment interferes with the outcome of psychosocial rehabilitation programs. Therefore, cognitive deficits are considered an important target for the development of new pharmacological treatments and for rehabilitation programs for patients with schizophrenia and other severe psychiatric conditions. This paper provides a review of the most recent research on cognitive impairment in schizophrenia and schizophrenia-spectrum disorders, and on its association with functional outcome.