Facial emotion recognition deficits have been widely investigated in individuals with schizophrenia; however, it remains unclear whether these deficits reflect a trait-like vulnerability to schizophrenia pathology present in individuals at risk for the disorder. Although some studies have investigated emotion recognition in this population, findings have been mixed. The current study uses a well-validated emotion recognition task, a relatively large sample, and examines the relationship between emotion recognition, symptoms, and overall life quality. Eighty-nine individuals with psychometrically defined schizotypy and 27 controls completed the Schizotypal Personality Questionnaire, Penn Emotion Recognition Test, and a brief version of Lehman’s Quality of Life Interview. In addition to labeling facial emotions, participants rated the valence of faces using a Likert rating scale. Individuals with schizotypy were significantly less accurate than controls when labeling emotional faces, particularly neutral faces. Within the schizotypy sample, both disorganization symptoms and lower quality of life were associated with a bias toward perceiving facial expressions as more negative. Our results support previous research suggesting that poor emotion recognition is associated with vulnerability to psychosis. Although emotion recognition appears unrelated to symptoms, it probably operates by means of different processes in those with particular types of symptoms. (JINS, 2010, 16, 474–483.)