A number of recent studies have suggested that schizophrenia patients share metamemory deficits, particularly, a decreased ability to distinguish between errors and correct responses in terms of response confidence (i.e., decreased confidence gap): patients are over-confident in errors while at the same time being under-confident in responses that are in fact correct. This, along with increased error rates, leads to an inflation of inaccurate but confidently held memories, which has been termed knowledge corruption. Previous studies on metamemory in schizophrenia patients predominantly tested chronic patients, leaving open the possibility that metamemory deficits stem partly from increased chronicity and long-term treatment. The primary aim of the current study was to establish whether a decreased confidence gap is also detectable in first-episode schizophrenia. For this purpose, a source memory task was administered to 30 first-episode patients with a diagnosis of schizophrenia or schizophreniform disorder, and 15 healthy control subjects. During encoding, items were read aloud by the experimenter and the participant in alternating order. For the recognition phase, participants were required to state the source of the item, and their confidence in their response. In agreement with previous studies, the patients displayed a decreased confidence gap, and increased knowledge corruption relative to controls. A reduced distinction between correct and incorrect information in metacognition is proposed to be a vulnerability factor for the development of delusions in schizophrenia.