The number of older patients with chronic schizophrenia is increasing. There is a need for empirically validated psychotherapy interventions for these older patients. A randomized controlled trial compared treatment as usual (TAU) with TAU plus cognitive-behavioral social skills training (TAU+CBSST) in 76 middle-aged and older patients with chronic schizophrenia. CBSST teaches cognitive-behavioral coping techniques, social functioning skills, problem solving and compensatory aids for neurocognitive impairments over 24 weekly group therapy sessions. Blind raters obtained assessments of social functioning, psychotic and depressive symptoms, and cognitive insight and CBSST skill mastery. After treatment, patients in TAU + CBSST performed social functioning activities significantly more frequently than patients in TAU, although general skill at performing social functioning activities did not differ significantly between the two groups. Significant treatment group effects were also found for cognitive insight and skill mastery, indicating patients in CBSST became more objective in reappraising psychotic symptoms and learned CBSST skills. The overall treatment group effect was not significant for symptoms, but greater increase in cognitive insight in CBSST was significantly correlated with greater reduction in positive symptoms, suggesting patients who showed increased cognitive insight in CBSST were more likely to show psychotic symptom reduction. With CBSST, therefore, middle-aged and older outpatients with chronic schizophrenia were able to learn cognitive-behavioral coping skills, changed the way they evaluate anomalous experiences (cognitive insight), and improved their social functioning. Future research is needed to determine whether cognitive insight mediates psychotic symptom change in cognitive-behavioral therapy for psychosis.