Individuals with schizophrenia demonstrate impairment in prospective memory (ProM), which describes the multifaceted ability to execute a future intention. Despite its clear implications for everyday functioning, the neuropsychological substrates and functional correlates of ProM impairment in schizophrenia remain poorly understood. In this study, the Memory for Intentions Screening Test (MIST), a standardized measure of ProM, was administered to 72 outpatients with schizophrenia or schizoaffective disorder as part of a comprehensive neuropsychological and psychiatric research evaluation. Results showed that ProM was positively correlated with standard clinical tests of attention, working memory, processing speed, learning, and executive functioning, but not delayed recall. In the context of multiple neuropsychological predictors, learning ability was the only domain that independently contributed to ProM. Importantly, better ProM was predictive of higher functional capacity (as measured by the UCSD Performance-Based Skills Assessment-Brief Version), above and beyond the variability explained by demographic and disease factors. Analysis of component processes revealed that event-based ProM, as well as no response (i.e., omission) and task substitution errors were the strongest predictors of everyday functioning. Overall, these findings suggest that ProM impairment in schizophrenia is associated with multiple cognitive substrates, particularly episodic learning deficits, and plays an important role in everyday living skills. Studies regarding the potential effectiveness of ProM-based remediation strategies to improve functional outcomes in schizophrenia are indicated.