Currently available treatments have limited efficacy in remediating cognitive impairment in schizophrenia. Efforts to facilitate cognition-enhancing drug discovery recommend the use of varied experimental cognitive paradigms (including relational memory) as assessment tools in clinical drug trials. Although relational memory deficits are increasingly being recognized as a reliable cognitive marker of schizophrenia, relational memory performance among unaffected biological relatives remains unknown. Therefore, we evaluated 73 adolescents or young adults (22 first- and 26 second-degree relatives of schizophrenia patients and 25 healthy controls (HC)) using a well-validated transitive inference (TI) experimental paradigm previously used to demonstrate relational memory impairment in schizophrenia. We found that TI deficits were associated with schizophrenia risk with first-degree relatives showing greater impairment than second-degree relatives. First-degree relatives had poorer TI performance with significantly lower accuracy and longer response times than HC when responding to TI probe pairs. Second-degree relatives had significantly quicker response times than first-degree relatives and were more similar to HC in TI performance. We further explored the relationships between TI performance and neurocognitive domains implicated in schizophrenia. Among HC, response times were inversely correlated with FSIQ, verbal learning, processing speed, linguistic abilities and working memory. In contrast, relatives (first-degree in particular) had a differing pattern of TI-neurocognition relationships, which suggest that different brain circuits may be used when relatives encode and retrieve relational memory. Our finding that unaffected biological relatives of schizophrenia patients have TI deficits lends further support for the use of relational memory construct in future pro-cognition drug studies.