The identification of individuals at high risk of developing a psychotic disorder has long been a goal of clinicians because it is thought that early treatment of this group may prevent onset of the disorder. However, little is known of predictive factors of psychosis, even within a high-risk group. This study followed up 104 young people thought to be at 'ultra high risk' for schizophrenia and other psychotic disorders by virtue of having a family history of psychotic disorder combined with some functional decline or the presence of subthreshold or self-limiting psychotic symptoms. All subjects were therefore symptomatic, but not psychotic, at intake. Thirty-six subjects (34.6%) developed frank psychotic symptoms within 12 months. Measures of symptom duration, functioning, disability and psychopathology were made at intake, 6 and 12 months. Poor functioning, long duration of symptoms, high levels of depression and reduced attention were all predictors of psychosis. A combination of family history of psychosis, a recent significant decrease in functioning and recent experience of subthreshold psychotic symptoms was also predictive of psychosis. Combining highly predictive variables yielded a method of psychosis prediction at 12 months with good positive predictive value (80.8%), negative predictive value (81.8%) and specificity (92.6%) and moderate sensitivity (60.0%). Within our symptomatic high-risk group, therefore, it appears possible to identify those individuals who are at particularly high risk of developing a psychotic disorder such as schizophrenia. Given the very high PPV and low false positive rate with this two-step process, it may be justifiable to target these individuals for intensive monitoring of mental state and even low-dose neuroleptic medication or other biological and psychosocial treatments depending on clinical condition. This indicated prevention approach could be further developed and preventive strategies in the psychoses refined.