BACKGROUND AND OBJECTIVES: The functional outcome of patients with psychotic disturbances is associated with several overlapping premorbid, societal, neuropsychological, and clinical factors. Extracting the factors associated with functional outcomes is important for designing effective mental health interventions. METHODS: In a naturalistic prospective European multicentre study, we analysed the effects of sociodemographic, preadmission, admission, and postadmission precursors on functional outcomes in 296 patients with recent-onset psychosis (ROP) and 262 patients at clinically high risk of psychosis (CHR-P). Functioning was assessed with the Global Assessment of Functioning-symptoms and deficits version-at baseline and at the 9- and 18-month follow-ups. RESULTS: In the overall sample, male sex, childhood adversities, poor sociability, scholastic problems, neurocognitive deficits, and greater severity of baseline and follow-up symptoms were associated with poor functional outcomes. In contrast, a favourable work/educational situation and preadmission treatment for nonpsychotic disorders were associated with better functional outcomes. Among ROP patients, neurocognitive deficits and the severity of baseline and follow-up affective and psychotic symptoms were strongly associated with functional outcomes. Among CHR-P patients, premorbid sociability, previous treatment for affective disorders, and follow-up affective symptoms played more significant roles. CONCLUSIONS: To improve functioning in patients in the early stages of psychosis, several factors should be considered, such as sex, childhood adversities, psychosocial development, baseline neurocognitive deficits, work/educational situation, clinical presentations, and follow-up symptoms. Personalized and integrated treatment and rehabilitation measures should be actively continued beyond the first admission period, with a particular focus on addressing both baseline and follow-up affective disturbances.