Psychotic symptoms in bipolar I disorder during mood episodes has been associated with several negative outcomes raising the question as to whether psychosis is a risk factor for a more severe form of this chronic and debilitating condition. However, relatively little research has been directed at understanding the relationships among social cognitive functioning in bipolar I disorder with and without a history of psychosis. Impaired social cognition has been identified as a putative endophenotypic markers in schizophrenia and the evidence is mounting as to whether similar impairments also exist in bipolar I disorder. Given the plethora of research supporting the presence of social cognitive impairments in schizophrenia researchers have sought to focus on subdomains and component parts of social cognition, such as theory of mind and the processing of naturalistic social exchanges. Compared to healthy controls, research in this area suggests that individuals with schizophrenia struggle to correctly recognize and interpret naturalistic social exchanges involving linguistically inconsistent inferences (e.g., sarcastic) as opposed to consistent inferences that are sincere. Research in this area involving participants with bipolar I disorder has been mixed, which may be explained by heterogeneous bipolar I disorder samples. To date, the theory of mind component involving recognition and interpretation of social exchanges has not been evaluated in individuals with bipolar I disorder with and without a history of psychosis during mood episodes. Hence, the overarching goal of this project was to evaluate whether a history of psychotic symptoms in bipolar I disorder are associated with impaired recognition and interpretation of naturalistic social exchanges, particularly those involving sincere, lie, and sarcastic exchanges.