Individuals with schizophrenia show reliable deficits in the ability to recognize emotions from vocal expressions. Here, we examined emotion recognition ability in 23 schizophrenia patients relative to 17 healthy controls using a stimulus battery with well-characterized acoustic features. We further evaluated performance deficits relative to ancillary assessments of underlying pitch perception abilities. As predicted, patients showed reduced emotion recognition ability across a range of emotions, which correlated with impaired basic tone matching abilities. Emotion identification deficits were strongly related to pitch-based acoustic cues such as mean and variability of fundamental frequency. Whereas healthy subjects' performance varied as a function of the relative presence or absence of these cues, with higher cue levels leading to enhanced performance, schizophrenia patients showed significantly less variation in performance as a function of cue level. In contrast to pitch-based cues, both groups showed equivalent variation in performance as a function of intensity-based cues. Finally, patients were less able than controls to differentiate between expressions with high and low emotion intensity, and this deficit was also correlated with impaired tone matching ability. Both emotion identification and intensity rating deficits were unrelated to valence of intended emotions. Deficits in both auditory emotion identification and more basic perceptual abilities correlated with impaired functional outcome. Overall, these findings support the concept that auditory emotion identification deficits in schizophrenia reflect, at least in part, a relative inability to process critical acoustic characteristics of prosodic stimuli and that such deficits contribute to poor global outcome.