A disorder of self-monitoring may underlie the positive symptoms of psychosis. The cognitive mechanisms associated with these symptoms may also be detectable in individuals at risk of psychosis. To investigate (a) whether patients with psychosis show impaired self-monitoring, (b) to what degree this is associated with positive symptoms, and (c) whether this is associated with liability to psychotic symptoms. The sample included: individuals with a lifetime history of non-affective psychosis (n=37), a genetically defined risk group (n=41), a psychometrically defined risk group (n=40), and control group (n=49). All participants carried out an action-recognition task. Number of action-recognition errors was associated with psychosis risk (OR linear trend over 3 levels:1.12, 95% CI1.04-1.20) and differential error rate was associated with the degree of delusional ideation in a dose-response fashion (OR linear trend over 3 levels:1.13, 95% CI1.00-1.26). Alterations in self-monitoring are associated with psychosis with evidence of specificity for delusional ideation. In the risk state, this is expressed more as failure to recognise self-generated actions, whereas in illness failure to recognise alien sources come to the fore.