Cognitive impairment has been widely studied in people with psychosis. However, research is lacking into the subjective experience of cognitive impairment, its impact and ways in which individuals cope. This study aimed to provide an account of the experience of cognitive impairment in people with a diagnosis of schizophrenia, including what difficulties people experience, how these difficulties are understood, how people respond to these difficulties and how they perceive others' views of these difficulties. A semi‐structured interview was carried out with eight participants with a diagnosis of schizophrenia focusing on participants' experiences of difficulties with cognitive functioning. Interpretative phenomenological analysis was used to analyse interview transcripts. Experience of cognitive impairment was understood in terms of six master themes: impaired controlled thinking, physical sensations and impaired movement, explanations for the impairment and comparisons to the past, managing the impairment, how others see the impairment and anticipating the future. This study is the first rigorous qualitative study of the subjective experience of cognitive impairment in people with psychosis, and it provides greater context for empirical findings. The results have significant implications for clinical psychology, including education about cognitive difficulties and the importance of cognitive functioning to formulation. New areas for research include coping strategies in relation to functioning and future perspectives, ascertaining staff understanding of cognitive impairment, and reflective conversation style as an intervention for metacognitive difficulties. Copyright © 2013 John Wiley & Sons, Ltd. Key Practitioner Message Difficulties with cognitive functioning should be considered in clinical practitioners' formulations of clients' difficulties in the context of psychosis. Services should consider providing service user and carer education about cognitive impairment in psychosis. Staff may need further training in order to support people with psychosis who have difficulties with cognitive functioning.