Accurately perceiving self-referential social signals, particularly eye contact, is critical to social adaptation. Schizophrenia (SCZ) is a severe mental disorder often accompanied by deficits in social cognition, but it is unclear whether this includes gaze discrimination deficits. This dissertation used a multi-method approach to examine whether and how eye gaze information is processed differently in schizophrenia, its functional consequences, and the role of basic visual perception in abnormal gaze perception. In Study 1, 26 participants with SCZ and 23 healthy controls (HC) made eye-contact judgments for faces in varying gaze direction (from averted to direct in ten 10%-increments), head orientation (forward, 30-degree averted), and emotion (neutral, fearful). Psychophysical analyses demonstrated that SCZ participants exhibited abnormal eye-contact perception characterized by over-attribution of self-directed intention to ambiguous gaze and decreased dichotomy of eye-contact perception. These abnormalities were related to more severe negative symptoms and explained deficits in broader socio-emotional functioning beyond a general deficit problem. In Study 2, 25 SCZ and 26 HC participants completed a gaze discrimination task while their event-related brain potentials (ERPs) were recorded. SCZ participants displayed ERP deviations that could not be accounted for by differential performance, including a heightened encoding sensitivity (N170) to faces signaling external threat, a tendency to integrate less the contextual cue of head orientation, and reduced mental resources for stimulus categorization (P300). In Study 3, 29 SCZ and 23 HC participants completed two tasks that measured visual integration, the ability to effectively integrate individual local visual elements into a holistic picture. SCZ participants showed poorer visual integration than HC, and compromised visual integration significantly predicted deficits in eye-contact perception and emotional intelligence in SCZ and explained group differences in these two social cognitive processes. Taken together, this dissertation showed that abnormal gaze perception is present in SCZ and bears important clinical and functional implications, and it may be driven by deficits in basic visual perception. The nature and functional relevance of gaze perception in SCZ informed by this dissertation may help developing treatment options targeting at specific brain areas/functions for persons with or at risk for SCZ in the future.