To examine the course and outcome of early-onset psychotic disorders. These are data from a longitudinal, prospective study of youths with psychotic disorders. Standardized diagnostic and symptom rating measures were used. Fifty-five subjects with the following disorders have been recruited: schizophrenia (n = 18), bipolar disorder (n = 15), psychosis not otherwise specified (n = 15), schizoaffective disorder (n = 6), and organic psychosis (n = 1). Follow-up assessments were obtained on 42 subjects at year 1 and 31 subjects at year 2. Youths with schizophrenia had more chronic global dysfunction, whereas subjects with bipolar disorder overall had better functioning, with a cyclical course of illness. However, according to results of a regression model, premorbid functioning and ratings of negative symptoms, but not diagnosis, significantly predicted the highest level of functioning over years 1 and 2. Course and level of functioning differentiated bipolar disorder from schizophrenia. However, premorbid functioning and ratings of negative symptoms were the best predictors of functioning over the follow-up period. These findings are consistent with the adult literature, and they further support that psychotic illnesses in young people are continuous with the adult-onset forms.