Schizophrenia (SZ) is a highly heritable disease with neurodevelopmental origins and significant functional brain network dysfunction. Functional network is heavily influenced by neurodevelopment processes and can be characterized by the degree of segregation and integration. This study examines functional segregation and integration in SZ and their first‐degree relatives (high risk [HR]) to better understand the dynamic changes in vulnerability and resiliency, and disease markers. Resting‐state functional magnetic resonance imaging data acquired from 137 SZ, 89 HR, and 210 healthy controls (HCs). Small‐worldness σ was computed at voxel level to quantify balance between segregation and integration. Interregional functional associations were examined based on Euclidean distance between regions and reflect degree of segregation and integration. Distance strength maps were used to localize regions of altered distance‐based functional connectivity. σ was significantly decreased in SZ compared to HC, with no differences in high risk (HR). In three‐group comparison, significant differences were noted in short‐range connectivity (primarily in the primary sensory, motor and their association cortices, and the thalamus) and medium/long‐range connectivity (in the prefrontal cortices [PFCs]). Decreased short‐ and increased medium/long‐range connectivity was found in SZ. Decreased short‐range connectivity was seen in SZ and HR, while HR had decreased medium/long‐range connectivity. We observed disrupted balance between segregation and integration in SZ, whereas relatively preserved in HR. Similarities and differences between SZ and HR, specific changes of SZ were found. These might reflect dynamic changes of segregation in primary cortices and integration in PFCs in vulnerability and resilience, and disease markers in SZ.