Impaired tolerance to distress may help explain part of the cognitive and functional impairments in schizophrenia (SZ). This project investigated distress intolerance in SZ patients as compared to controls, and whether distress intolerance represented an independent domain in relationship to symptoms, cognition, and functional capacity. Healthy controls (n=43) and SZ (n=65) completed a psychological distress challenge experiment and their levels of intolerance to distress were estimated. SZ showed increased distress intolerance such that they were significantly more likely to terminate the distress challenge session early compared to controls. Greater distress intolerance was associated with reduced functional capacity and worse cognitive performance in SZ. Mediation analyses suggested that distress intolerance had an independent effect on functional capacity, while some of this effect was mediated by cognitive performance. Our results suggest that distress intolerance is a promising domain for treatment research, and functional capacity may be improved by targeting treatments towards SZ patient׳s ability to tolerate distress.