A growing body of research suggests that schizophrenia and bipolar disorder share overlapping clinical, neurobiological, and genetic features, raising important questions about the boundaries and distinctiveness of these 2 major psychiatric disorders. A generalized cognitive impairment has long been understood to be a core feature of schizophrenia. More recently, it has become apparent that cognitive impairment also occurs in bipolar disorder, particularly in those patients with a history of psychotic symptoms. Whether a generalized deficit exists across a spectrum of psychotic disorders is less clearly established. Additionally, in the context of a broad impairment, it remains a significant challenge to identify deficits in specific cognitive processes that may have distinct neurochemical or regional brain substrates and linkages to particular risk-associated genetic factors. In this article, we review the findings from neuropsychological studies across a spectrum that includes schizophrenia, schizoaffective and bipolar disorders, and conclude the available evidence strongly supports that a generalized deficit is present across psychotic disorders that differs in severity more so than form. We then consider the implications of generalized and specific deficits in psychosis for 2 areas of research—the evaluation of pharmacological treatments targeting cognitive deficits, and the investigation of cognitive intermediate phenotypes in family genetic studies. Examples from the literature that touch on the relevance of the generalized deficit in these contexts are provided, as well as consideration for the continued need to identify specific impairments that are separable from the generalized deficit in order to advance drug and gene discovery.