Background: Clinical symptoms and neuropsychological deficits are longitudinally associated with functional outcome in chronic psychiatric cohorts. The current study extended these findings to young and early-course psychiatric outpatients, with the aim of identifying cognitive markers that predict later socio-occupational functioning. Methods: At baseline, 183 young psychiatric outpatients were assessed. Ninety-three returned for follow-up (M = 21.6 years old; SD = 4.5) with an average re-assessment interval of 21.6 months (SD = 7.0), and primary diagnoses of major depressive disorder (n = 34), bipolar disorder (n = 29), or psychosis (n = 30). The primary outcome measure was cross-validated with various other functional measures and structural equation modelling was used to map out the interrelationships between predictors and later functional outcome. Results: Good socio-occupational functioning at follow-up was associated with better quality of life, less disability, current employment and being in a romantic relationship. The final structural equation model explained 47.5% of the variability in functional outcome at follow-up, with baseline neuropsychological functioning (a composite of memory, working memory and attentional switching) the best independent predictor of later functional outcome. Notably, depressive and negative symptoms were only associated with functioning cross-sectionally. Diagnosis at follow-up was not associated with functional outcome. Conclusions: Neuropsychological functioning was the single best predictor of later socio-occupational outcome among young psychiatric outpatients. Therefore, framing psychiatric disorders along a neuropsychological continuum is likely to be more useful in predicting functional trajectory than traditional symptom-based classification systems. The current findings also have implications for early intervention utilising cognitive remediation approaches.