Schizophrenia, bipolar disorder, and related psychotic illnesses are common, serious mental disorders that are often associated with functional impairments and poor quality of life, even after clinical recovery. Cognitive dysfunction is a strong predictor of functional impairment; however, findings regarding relative impairments in functioning and cognition across diagnoses have been mixed, as have reports of the contribution of clinical symptoms and other illness features to functioning across diagnostic boundaries. We assessed 211 patients with psychotic disorders and 87 healthy controls using the MATRICS Consensus Cognitive Battery, clinical measures of state mood and psychotic symptoms, and an interview measure of community functioning. Diagnostic groups were compared on MATRICS composite and domain scores, and clinical and functional measures. We then examined cognitive, clinical, and demographic predictors of community functioning using stepwise hierarchical linear regression. All three patient groups exhibited deficits in most cognitive domains relative to controls, and significantly poorer community functioning. While scores on most cognitive domains did not differ by diagnosis, when groups did differ patients with schizophrenia performed worse than patients with bipolar disorder. Cognition was correlated with functioning across the sample. The final regression model included negative symptoms, mania, social cognition, and processing speed, and explained 47% of the variance in community functioning scores across patient groups. Residual negative symptoms, residual mania, and social cognition significantly and independently predicted community functioning. These findings indicate that, while all cognitive domains are associated with community outcomes, when considered together and with clinical symptoms, negative symptoms, mania, and social cognition are the strongest predictors across diagnoses. Development of interventions targeting negative symptoms and social cognition may be effective in improving community functioning for patients across diagnoses.