It has been proposed that a characteristic of schizophrenic processing is an abnormality of top-down processing. The relationship between impaired top-down processing and symptoms of reality distortion was investigated using a ‘degraded interference’ task. In this task, fragmented stimuli (Stroop words, control words and crosses) are presented on a computer screen, and the extent to which they are visually integrated is inferred by their interfering properties. It was predicted that psychotic individuals would fail to show an interference effect with degraded Stroop stimuli. This predicts the absence of a delay in reaction time in the experimental condition, which therefore cannot be attributed to a generalized deficit. A sample of inpatients experiencing positive symptoms was compared to a healthy control group. The results provided support for a deficiency in top-down processing, with the psychotic group failing to show the significant degraded interference effect found in the healthy controls. Degraded interference was associated with low verbal IQ, but with no other symptomatic or demographic variables.