Background. Psychosis is associated with a reasoning bias, which manifests as a tendency to 'jump to conclusions'. We examined this bias in people at clinical high-risk for psychosis (CHR) and investigated its relationship with their clinical outcomes. Methods. In total, 303 CHR subjects and 57 healthy controls (HC) were included. Both groups were assessed at baseline, and after 1 and 2 years. A 'beads' task was used to assess reasoning bias. Symptoms and level of functioning were assessed using the Comprehensive Assessment of At-Risk Mental States scale (CAARMS) and the Global Assessment of Functioning (GAF), respectively. During follow up, 58 (16.1%) of the CHR group developed psychosis (CHR-T), and 245 did not (CHR-NT). Logistic regressions, multilevel mixed models, and Cox regression were used to analyse the relationship between reasoning bias and transition to psychosis and level of functioning, at each time point. Results. There was no association between reasoning bias at baseline and the subsequent onset of psychosis. However, when assessed after the transition to psychosis, CHR-T participants showed a greater tendency to jump to conclusions than CHR-NT and HC participants (55, 17, 17%; χ2 = 8.13, p = 0.012). There was a significant association between jumping to conclusions (JTC) at baseline and a reduced level of functioning at 2-year follow-up in the CHR group after adjusting for transition, gender, ethnicity, age, and IQ.