Results of the previous studies regarding facial emotion recognition (FER) in schizophrenia (SCH) are very heterogeneous. Our study was divided in two parts: cross-sectional study aiming to investigate differences in FER between 80 patients with first-episode psychosis (FEP), 80 patients with SCH and 80 healthy controls (HC) and prospective study with 159 patients with FEP aiming to investigate changes in FAR between first acute episode and after 18 months of treatment. We analyzed correlations of FAR with psychopathology, quality of life and functioning. Our results showed statistically significant differences between HC and patients’ groups in overall recognition and recognition of negative emotions, with the worst results in SCH. After 18 months of treatment, FAR improved for all emotions except sadness. Also, we found significant correlations of psychopathology, quality of life and functioning with FAR, especially in FEP. In conclusion, FAR deficits are present since the beginning of the illness, with emphasis on negative emotions which do not show improvement even after 18 months of treatment. Taking this into account, along with the correlations with psychopathology, quality of life and functioning, FAR deficits should be included in the initial assessment and treatment plan since the first episode of the illness.