This study aimed to determine which of demographic/premorbid, psychiatric or neuropsychological factors best predict functional outcome at 3 years after a first episode of psychotic illness. This will, it is hoped, identify prognostic indicators of longer term outcomes, as well as targets for rehabilitation. The Western Sydney First Episode Psychosis Project collected data on young people (aged 13 to 25) presenting with newly diagnosed psychosis at baseline and 3-year follow-up (n=52). Outcome was measured using the Role Functioning Scale (RFS) and the Clinical Global Impression Scale--severity of illness measure (CGI-S). Multiple regression analyses were performed to identify baseline predictors of outcome. The Premorbid Social Adjustment Scale in Adolescence (PSAS-Adolescent) and the Verbal Comprehension Index from the WAIS-III were found to be the two significant predictors for RFS, with only the former (PSAS-Adolescent) predicting CGI-S. Demographic and neuropsychological measures relating to premorbid functioning were the best predictors of long-term outcome in first episode psychosis, with baseline psychiatric symptoms not contributing.