The study of social cognition in psychiatric disorders has become increasingly popular in recent years. This is due to the its proposed link to social functioning and the inability of general neurocognitive skills to explain the spectrum of impairments observed in patients. This article reviews research into two of the processes thought to underlie social cognition (emotion perception and theory of mind) in schizophrenia and autism. This is followed by a look at neuroimaging studies and their efforts to localize the neural correlates of emotion perception and theory of mind in the two disorders. We concluded that while a specific impairment in emotion perception and theory of mind skills cannot be generalized to all individuals with autism and schizophrenia, there are subpopulations that have lingering deficits of social cognition tasks. Neuroimaging work consistently points to the involvement of the fusiform gyrus and amygdala in emotion processing, while the medial prefrontal and frontal cortex are implicated in tasks invoking theory of mind. We propose that deficits of social cognition may benefit from cognitive remediation therapy and pharmacological cognitive enhancers.