Schizophrenia typically involves poor social functioning. This may be due, in part, to deficits in theory-of-mind, the cognitive ability to reason flexibly about the mental states of others. Patients also have deficits in social knowledge. It is currently unclear how these two impairments interrelate in schizophrenia. To address this issue, 43 patients with schizophrenia and 25 healthy controls completed two theory-of-mind tests and a novel test of social judgment. This latter measure required participants to judge whether various social behaviors were normal or reasonable in the context in which the behaviors occurred. Whereas patients demonstrated clear deficits in theory-of-mind, they performed similarly to controls when judging socially appropriate behaviors and violations of social norms. Patients, however, were less likely than controls to judge social behavior as reasonable when the behavior was impolite but understandable if the characters' thoughts were taken into account. This latter difficulty correlated with patients' performance deficits on the theory-of-mind tasks. Overall, findings suggest that basic social knowledge is intact in schizophrenia, though judgments of social behavior are affected by patients' theory-of-mind deficits.