Schizophrenia patients show impairments in identifying facial affect; however, it is not known at what stage facial affect processing is impaired. We evaluated 3 event-related potentials (ERPs) to explore stages of facial affect processing in schizophrenia patients. Twenty-six schizophrenia patients and 27 normal controls participated. In separate blocks, subjects identified the gender of a face, the emotion of a face, or if a building had 1 or 2 stories. Three ERPs were examined: (1) P100 to examine basic visual processing, (2) N170 to examine facial feature encoding, and (3) N250 to examine affect decoding. Behavioral performance on each task was also measured. Results showed that schizophrenia patients' P100 was comparable to the controls during all 3 identification tasks. Both patients and controls exhibited a comparable N170 that was largest during processing of faces and smallest during processing of buildings. For both groups, the N250 was largest during the emotion identification task and smallest for the building identification task. However, the patients produced a smaller N250 compared with the controls across the 3 tasks. The groups did not differ in behavioral performance in any of the 3 identification tasks. The pattern of intact P100 and N170 suggest that patients maintain basic visual processing and facial feature encoding abilities. The abnormal N250 suggests that schizophrenia patients are less efficient at decoding facial affect features. Our results imply that abnormalities in the later stage of feature decoding could potentially underlie emotion identification deficits in schizophrenia. © The Author 2008. Published by Oxford University Press on behalf of the Maryland Psychiatric Research Center. All rights reserved.