Importance:Neurophysiologic measures of early auditory information processing (EAP) are used as endophenotypes in genomic studies and biomarkers in clinical intervention studies. Research in schizophrenia has established correlations among measures of EAP, cognition, clinical symptoms, and functional outcome. Clarifying these associations by determining the pathways through which deficits in EAP affect functioning would suggest when and where to therapeutically intervene. Objectives:To characterize the pathways from EAP to outcome and to estimate the extent to which enhancement of basic information processing might improve cognition and psychosocial functioning in schizophrenia. Design, Setting, and Participants:Cross-sectional data were analyzed using structural equation modeling to examine the associations among EAP, cognition, negative symptoms, and functional outcome. Participants were recruited from the community at 5 geographically distributed laboratories as part of the Consortium on the Genetics of Schizophrenia 2 from July 1, 2010, through January 31, 2014. This well-characterized cohort of 1415 patients with schizophrenia underwent EAP, cognitive, and thorough clinical and functional assessment. Main Outcome and Measures:Mismatch negativity, P3a, and reorienting negativity were used to measure EAP. Cognition was measured by the Letter Number Span test and scales from the California Verbal Learning Test-Second Edition, the Wechsler Memory Scale-Third Edition, and the Penn Computerized Neurocognitive Battery. Negative symptoms were measured by the Scale for the Assessment of Negative Symptoms. Functional outcome was measured by the Role Functioning Scale. Results:Participants included 1415 unrelated outpatients diagnosed with schizophrenia or schizoaffective disorder (mean [SD] age, 46  years; 979 males [69.2%] and 619 white [43.7%]). Early auditory information processing had a direct effect on cognition (β = 0.37, P < .001), cognition had a direct effect on negative symptoms (β = -0.16, P < .001), and both cognition (β = 0.26, P < .001) and experiential negative symptoms (β = -0.75, P < .001) had direct effects on functional outcome. The indirect effect of EAP on functional outcome was significant as well (β = 0.14, P < .001). Overall, EAP had a fully mediated effect on functional outcome, engaging general rather than modality-specific cognition, with separate pathways that involved or bypassed negative symptoms. Conclusions and Relevance:The data support a model in which EAP deficits lead to poor functional outcome via impaired cognition and increased negative symptoms. Results can be used to help guide mechanistically informed, personalized treatments and support the strategy of using EAP measures as surrogate end points in early-stage procognitive intervention studies.