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OBJECTIVE: Symptomatic overlap between affective disorders and schizophrenia has long been noted. More recently, family and linkage studies have provided some evidence for overlapping genetic susceptibility between bipolar disorder and schizophrenia. If shared genes are responsible for the psychotic manifestations of both disorders, these genes may result in clustering of psychotic symptoms in some bipolar disorder pedigrees. The authors tested this hypothesis in families ascertained for a genetic study of bipolar disorder. METHOD: Rates of psychotic symptoms—defined as hallucinations or delusions—during affective episodes were compared in families of 47 psychotic and 18 nonpsychotic probands with bipolar I disorder. The analysis included 202 first-degree relatives with major affective disorder. RESULTS: Significantly more families of psychotic probands than families of nonpsychotic probands (64% versus 28%) contained at least one relative who had affective disorder with psychotic symptoms. Significantly more affectively ill relatives of psychotic probands than of nonpsychotic probands (34% versus 11%) had psychotic symptoms. An analysis of clustering of psychotic subjects across all families revealed significant familial aggregation. Clustering of psychosis was also apparent when only bipolar I disorder was considered the affected phenotype. CONCLUSIONS: Psychotic bipolar disorder may delineate a subtype of value for genetic and biological investigations. Families with this subtype should be used to search for linkage in chromosomal regions 10p12–13, 13q32, 18p11.2, and 22q11–13, where susceptibility genes common to bipolar disorder and schizophrenia may reside. Putative schizophrenia-associated biological markers, such as abnormal evoked response, oculomotor, and neuroimaging measures, could similarly be explored in such families.