The objective was to examine the impacts of duration of preadoption out-of-home care and adoptive family functioning on later psychiatric morbidity of adoptees with high (HR) and low (LR) genetic risk for schizophrenia spectrum disorders. The study uses nationwide data from the Finnish Adoptive Family Study of Schizophrenia. The study population in this substudy consisted of 43 h adoptees and 128 LR adoptees. Of these adoptees, 90 had spent 0–6 months and 81 over 6 months in preadoption out-of-home care. The family functioning of adoptive families was assessed based on Global Family Ratings and psychiatric disorders on DSM-III-R criteria. The results showed that among the adoptees with over 6 months in preadoption out-of-home care, the likelihood for psychiatric disorders was significantly increased in HR adoptees compared to LR adoptees. In adoptees with 6 months or less in preadoption out-of-home care, an increased likelihood for psychiatric disorders was found among those living in adoptive families with dysfunctional processes. These findings indicate that especially for HR children, a well-functioning early caregiving environment is crucial in terms of subsequent mental wellbeing. The results emphasize that when adoption is necessary, early placement and well-functioning adoptive family environment are beneficial to children.