We investigated social cognition and theory of mind in patients with schizophrenia and in patients with frontotemporal dementia in order to elucidate the cognitive mechanisms involved in the breakdown of these skills in psychiatric and neurological patients. Our tasks included videotaped scenarios of social interactions depicting sincere, sarcastic and paradoxical remarks, as well as lies. We found impaired performance of the schizophrenia group on all theory of mind conditions despite their intact understanding of sincere statements. In contrast, the FTD group performed poorly only when they had to rely on paralinguistic cues indicating sarcasm or lies, and not on paradoxical remarks or sarcasm when given additional verbal cues. Our findings suggest that, while current deficits in social and interpersonal functioning in patients with FTD may reflect a decrement in previously acquired skills, similar deficits in patients with schizophrenia may reflect an altogether inadequately learned process.