Schizophrenia is one of the most severe psychiatric conditions, often associated with deficits in social cognition. Social cognition deficits are predictors of functionality in patients and involve theory of mind, attributional style, social perception, and emotional processing. In particular, facial emotion processing (an important domain of emotional processing) seems to be particularly related to cognitive and social functioning, and to positive and negative symptoms. Patients with schizophrenia have difficulties in processing emotional faces; however, those impairments are still far from fully understood. In this review, we addressed the behavioural and neural correlates of facial emotion processing in schizophrenia. Despite studies showing impairments in both positive and negative faces, the most consistent findings involved negative faces. Moreover, patients with schizophrenia showed abnormalities in the social brain neural circuit during facial emotion processing. While some studies described hypoactivation of brain areas related to emotional processing, such as the amygdala, others reported hyperactivation, leading to a high number of inconsistencies. The findings are limited by the experimental designs used, and the clinical and demographic characteristics of patients. Despite such variable findings, there has been growing interest in developing psychosocial interventions focused directly on social cognitive impairments in schizophrenia, with potential impact on patient's ability to perceive emotional faces. We provide a critical perspective on current evidence and suggest new pathways of research. The understanding of the mechanisms underlying facial emotion processing in schizophrenia could enhance functionality and quality of life by providing innovative approaches to the interpersonal difficulties patients frequently experience.