Significant symptomatic improvement after a first episode of psychosis is not matched by a similar improvement in functional outcome. Thus, increased attention has been given to psychological intervention, in particular cognitive cognitive-behavioural therapy (CBT), with the hope of enhancing functional recovery. Outcome trials of CBT for schizophrenia are few, in particular for the first episode, and have been occasionally criticised for their lack of significance compared with supportive therapies. We describe a modular CBT approach for those with a first episode of psychosis that addresses adaptation as well as both functional and symptomatic outcome and one that parallels the theoretical shift in CBT that has occurred in the last decade. Guidelines for integrating CBT into an early psychosis service are presented.