Background: Schizophrenia is a significantly disabling disease that affects all major areas of life. There is a lack of comprehensive synthesis of research findings on the full extent of psychosocial difficulties (PSDs) experienced by people living with schizophrenia. This paper provides a systematic review of the literature concerning PSDs and their associated factors in schizophrenia. PSDs were conceptualized in accordance with the International Classification of Functioning, Disability and Health (ICF) as disabilities, in particular impairments of mental functions, activity limitations and participation restrictions. Methods: An electronic search using MEDLINE and PsychINFO plus a manual search of the literature was performed for qualitative and longitudinal studies published in English between 2005 and 2010 that examined PSDs in persons with schizophrenia. The ICF was used as a conceptual framework. Results: A total of 104 papers were included. The most frequent PSDs addressed in the literature were not specific ones, directly linkable to the ICF categories of mental functions, activity limitations or participation restrictions, but broad areas of psychosocial functioning, such as psychopathological symptoms (53% of papers) or global disability and functioning (37%). Among mental functions, the most extensively studied were cognitive functions (27%) and emotional functions (27%). Within the domain of activities and participation, the most widely investigated were difficulties in relationships with others (31%) and employment (20%). Of the factors associated with the intensity or course of PSDs, the most commonly identified were treatment modalities (56%), psychopathological symptoms (26%), and socio-demographic variables (24%). Medication tended to improve the most relevant PSD, but at the same time was the only consistently reported determinant of onset of PSDs (emerging as unwanted side-effects). Conclusions: The present review illustrates the remarkably broad scope and diversity of psychosocial areas affected in schizophrenia and shows how these areas are interconnected and how they interact with contextual factors. The need for a shift in focus of schizophrenia research is suggested - from an excessive reliance on global measures of psychopathology and disability for defining outcomes to the creation of profiles of specific PSDs that have a more direct bearing on the disabling experience and real-world functioning of patients and can serve to guide interventions and monitoring over time.