Negative symptoms—such as avolition, anhedonia, alogia, affective flattening, and social withdrawal—are core features of schizophrenia that significantly impact psychosocial functioning. Unlike positive symptoms, which are often more responsive to antipsychotic treatment, negative symptoms tend to persist over time and are strongly associated with poor social, occupational, and interpersonal outcomes. This review explores the relationship between negative symptoms and various domains of psychosocial functioning, including employment, social relationships, independent living, and quality of life. Evidence suggests that primary negative symptoms, rather than secondary effects of medication, depression, or psychosis, are the strongest predictors of long-term disability in individuals with schizophrenia. Additionally, functional outcomes are often mediated by deficits in motivation and emotional engagement, highlighting the importance of targeting these domains in therapeutic interventions. Despite advances in pharmacological and psychosocial treatments, effective management of negative symptoms remains a significant clinical challenge. Emerging approaches, such as cognitive remediation, social skills training, and novel pharmacological agents, show promise but require further validation. Understanding the complex interplay between negative symptoms and psychosocial functioning is essential for developing comprehensive treatment strategies aimed at improving real-world outcomes in schizophrenia.