Although there is convergent evidence for blood-brain barrier (BBB) dysfunction and peripheral inflammation in schizophrenia (SZ) and bipolar disorder (BD), it is unknown whether BBB deficits are intrinsic to brain microvascular endothelial cells (BMECs) or arise via effects of peripheral inflammatory cytokines. We examined BMEC function using stem cell-based models to identify cellular and molecular deficits associated with BBB dysfunction in SZ and BD. Induced pluripotent stem cells (iPSCs) from 4 SZ, 4 psychotic BD and 4 healthy control (HC) subjects were differentiated into BMEC-"like" cells. Gene expression and protein levels of tight junction proteins were assessed. Transendothelial electrical resistance (TEER) and permeability were assayed to evaluate BBB function. Cytokine levels were measured from conditioned media. BMECs derived from human iPSCs in SZ and BD did not show differences in BBB integrity or permeability compared to HC BMECs. Outlier analysis using TEER revealed a BBB-deficit (n = 3) and non-deficit (n = 5) group in SZ and BD lines. Stratification based on BBB function in SZ and BD patients identified a BBB-deficit subtype with reduced barrier function, tendency for increased permeability to smaller molecules, and decreased claudin-5 (CLDN5) levels. BMECs from the BBB-deficit group show increased matrix metallopeptidase 1 (MMP1) activity, which correlated with reduced CLDN5 and worse BBB function, and was improved by tumor necrosis factor α (TNFα) and MMP1 inhibition. These results show potential deficits in BMEC-like cells in psychotic disorders that result in BBB disruption and further identify TNFα and MMP1 as promising targets for ameliorating BBB deficits.