Cognitive dysfunctions are one of the main domains of symptom clusters in schizophrenia that are strongly related to poor prognosis and psychosocial impairment. We conducted a study to investigate the level of cognitive functions in patients with first episode psychosis (FEP) and effect of psychosocial factors related to psychosis and cognitive dysfunctions in this population. We included 60 FEP patients and 60 healthy control subjects. Cognitive functions of the study population were evaluated by using neuropsychological test battery including Stroop, Rey Verbal Learning and Memory, Digit Span, Trail Making, Digit Symbols, Controlled Word Association etc. Psychosocial risk factors were assessed using Childhood Trauma Questionnaire, Social Environment Measurement Tool, Life Events Scale, Tobacco Alcohol Use Scale and Substance/Marijuana Use Scale. Cognitive functions were significantly impaired in FEP patients compared to normal controls. Patients had poor performance in verbal memory, attention, processing speed, working memory and executive functions that is similar to the previous literature findings. Stressful life events in the last year and familial liability of schizophrenia and psychosis in 1st degree relatives were strong predictors to develop psychosis in patients with FEP. Both factors also seemed to be related to cognitive dysfunctions. In this study, patients with stressful life events in the last year were likely to have memory and executive dysfunctions. It has been shown that psychosocial risk factors had played an important role in developing psychosis. However, these factors also may negatively affect cognitive functions that may make the patient predispose to develop psychosis in FEP patients.