ABSTRACT Recent research suggests that the Autonomic Nervous System (ANS), which plays a role in arousal and wakefulness, is likewise important for attention and cognitive functions. While key circuits involved in these functions have long been implicated in the pathophysiology of psychosis, the mechanism linking the ANS to cognitive impairment in psychosis is lacking. Stress triggers a shift in the balance between the parasympathetic and sympathetic nervous systems. We propose that stress-induced ANS imbalance alters arousal-related brain circuitry and constitutes a key component of the pathophysiology underlying cognitive impairment in psychosis. In the current proposal, we combine functional Magnetic Resonance Imaging (fMRI) with peripheral physiological recordings to examine on-going fluctuations in arousal-related cortical activity associated with trial-to-trial fluctuations in cognitive task performance in patients with First Episode Psychosis (FEP). ANS arousal-related brain circuitry will be interrogated in a well-characterized cohort of 40 medication naïve patients with FEP and 40 matched controls. Biological samples and questionnaires assessing current and chronic stress levels will be collected to test whether ANS arousal-related cortical activity mediates the relationship between stress and cognitive impairment in FEP. ANS function will be well-characterized both in- scanner and out-of-scanner (biological samples, electrocardiogram, pulse-oximetry). Resting-state fMRI and two well-validated fMRI tasks will be employed to probe key cognitive circuitry that is aberrant in FEP in order to assess how ANS arousal-related activity impacts different cognitive abilities. Psychotic symptomatology (hallucinations, delusions, and thought disorder) and cognitive abilities will be measured using comprehensive batteries. Potentially confounding factors (e.g. diurnal rhythms, caffeine use, drug use, medication status) will be controlled for. We aim to establish a novel pathway in the neurobiology of cognitive impairment associated with psychosis, which will provide important insight into the pathophysiology of psychosis and potentially yield novel therapeutic targets.