Theory of Mind (ToM) deficits interfere in social cognitive functioning in schizophrenia (SCZ) and are increasingly recognized to do so in bipolar disorder (BD), however their clinical and neurobiological correlates remain unclear. This study represents the first direct comparison of subjects with SCZ (N = 26), BD (N = 26) and healthy controls (N = 33) in cortical activity during the Reading the Mind in the Eyes Task (RMET) using functional Near Infrared Spectroscopy (fNIRS) with the control condition (CC) involving gender identification via the same stimuli. The three groups were compared with a comprehensive ToM battery and assessed in terms of the relationship of ToM performance with clinical symptoms, insight and functioning. The controls scored higher than the SCZ and BD groups in ToM assessments, with SCZ group showing the worse performance in terms of meta-representation and empathy. The SCZ group ToM scores inversely correlated with negative symptom severity and positively correlated with insight; BD group ToM scores negatively correlated with subclinical mania symptoms and projected functioning. Cortical activity was higher during the ToM condition compared to the CC in the pre-motor and supplementary-motor cortices, middle and superior temporal gyri, and the primary somatosensory cortex. Group x Condition interaction was detected whereby activity was higher during the ToM condition among controls with no detected difference between SCZ and BD groups. The results suggest that ToM is represented similarly in cortical activity in SCZ and BD compared to healthy controls pointing to possible neurobiological convergence of SCZ and BD in underlying impairments of social cognition. Copyright © 2020. Published by Elsevier B.V.