Building upon Vygotsky’s (1934) theorizing regarding the disturbance of the function of concept formation in individual’s diagnosed with schizophrenia, we conducted a 12 week-long narrative study which explores social cognition, conceptualized along the lines of person-activity-context, in adults residing at a large psychiatric hospital in New York City. In order to explore the function of social cognition – operationalized in this study in terms of narrators’ use and integration of evaluative elements such as psychological states, causal relations, and conflict resolution strategies across various narrative dimensions – we asked the participants to narrate in response to prompts that direct their writing toward varied audiences. We hypothesized that narrative functions will be better integrated when participants are engaged in sense-making of a) fictional social contexts, followed by b) social contexts outside of the hospital and c) social context of other’s with significant power over their daily functioning within the hospital. Comparative data analyses of narratives (about conflict resolution inside and outside of the hospital, and letters written by patients to a doctor inside the hospital and a friend outside of the hospital) written by fifteen participants show a clear difference in the use of evaluative elements across social contexts b and c, in a direction opposite from our initial hypothesis. Specifically, data shows pronounced differences in narrative length, use of psychological states, conflict resolution strategies, use of causal connectors, and overall greater scrip complexity in narratives towards the social context of other’s with significant power than toward social context outside of the hospital.