Several clinical predictors of outcome in schizophrenia have been described; however, very few studies have examined neurobiological factors that predict outcome. The objective of this study was to examine the value of the morphology of the dorsolateral prefrontal cortex (DLPFC) determined by magnetic resonance imaging (MRI) as a predictor of short-term functional outcome in antipsychotic-naive patients with first-episode schizophrenia or schizoaffective disorder. Twenty-seven consecutive patients with first-episode schizophrenia or schizoaffective disorder underwent structural MRI at baseline. Functional outcome - a composite measure of social and employment subscales of the Strauss-Carpenter Scale - was assessed at 1 and 2 years. Volume of the left DLPFC at baseline predicted functional outcome in schizophrenia at 1 but not at 2 years. Specific cognitive functions regulated by the left DLPFC may be critical for functional outcome.