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Objective: While neuropsychological test performance is correlated with social outcomes in patients with schizophrenia, there is little evidence to date that changes in neuropsychological performance are associated with changes in these outcomes. As part of an efficacy and tolerability study of atypical antipsychotics, the authors used a performance-based measure of social competence as a short-term outcome measure and examined the correlations between changes in social competence and improvements on neuropsychological tests. Method: Patients with schizophrenia were randomly assigned in a 1:1 ratio to receive treatment with either quetiapine (dose range: 200–800 mg/day) or risperidone (dose range: 2–8 mg/day) for an 8-week period. Results: Of 673 patients initially randomized, 289 had baseline and endpoint neuropsychological and functional competence data. Scores on the performance-based measure of social competence significantly improved with both treatments, as did a number of aspects of neuropsychological performance. Improvements in several aspects of neuropsychological performance were correlated with the extent of improvement in social competence. There were no overall differences between the treatments in their impact on social competence and neuropsychological performance. Conclusions: Short-term treatment with both quetiapine and risperidone resulted in improvements in social competence, with these improvements associated with improvements on some of the neuropsychological measures. In addition to their clinical importance, these results support the use of performance-based competence assessments as outcome measures in clinical trials.