Introduction Cognitive deficits predict functional capacity in patients with schizophrenia including in late life. The MATRICS Consensus Cognitive Battery (MCCB) and the Cambridge Neuropsychological Test Automated Battery (CANTAB) are widely used to assess cognition in this population. The aim of this study was to determine a minimal set of subtests across the two batteries that would be strongly associated with functional capacity in older patients with schizophrenia. Methods Sixty participants age 50 years or older with a diagnosis of schizophrenia or schizoaffective disorder and 30 control participants were enrolled. Cognition was assessed using the MCCB and the CANTAB. Functional capacity was assessed using the USCD Performance‐based Skills Assessment (UPSA). Stepwise linear regressions were performed to determine the best set of cognitive tests associated with functional capacity. Results UPSA total score was negatively correlated with age and positively correlated with education and the MCCB global score. Most of the MCCB domains and subtests, and several of the CANTAB subtests correlated with UPSA total score. In the regression model, MCCB global score accounted for 42.5% of UPSA variance. In contrast, a combination of only four subtests (processing speed and verbal learning from the MCCB, and affective information processing and working memory from the CANTAB) accounted for 60% of UPSA variance. Conclusions Performance on MCCB and CANTAB is strongly associated with functional capacity in older patients with schizophrenia. A selective combination of MCCB and CANTAB subtests may be as effective in assessing functional capacity in late life schizophrenia. Copyright © 2016 John Wiley & Sons, Ltd.