Background Counterfactual thinking is a specific type of conditional reasoning that enables the generation of mental simulations of alternatives to past factual events. Although it has been broadly studied in the general population, research on schizophrenia is still scarce. The aim of the current study was to further examine counterfactual reasoning in this illness. Methods Forty schizophrenia patients and 40 controls completed a series of tests that assessed the influence of the "causal order effect" on counterfactual thinking, and the ability to generate counterfactual thoughts and counterfactually derive inferences from a hypothetical situation. Socio-demographic and clinical characteristics, as well as neurocognitive variables, were also examined. Results Compared to controls, the schizophrenia patients generated fewer counterfactual thoughts when faced with a simulated scenario. The pattern of response when assessing the causality effect of the order was also different between the groups, with the patients being more frequently unable to attribute any ordering of events than the control subjects. Additionally, the schizophrenia patients showed more difficulties when deriving normative counterfactual inferences from hypothetical social situations. None of the counterfactual reasoning measures was associated to any of the cognitive functions or clinical and socio-demographic variables assessed. Conclusions A global impairment in counterfactual thinking characterizes schizophrenia patients. Because of the potential impact of such deficits on psychosocial functioning, targeting counterfactual reasoning for improvement might be considered in future treatment approaches.