Abstract Background Deficits in social cognition (SC) are significantly related to community functioning in schizophrenia (SZ). Few studies investigated longitudinal changes in SC and its impact on recovery. In the present study, we aimed: (a) to estimate the magnitude and clinical significance of SC change in outpatients with stable SZ who were assessed at baseline and after 4 years, (b) to identify predictors of reliable and clinically significant change (RCSC), and (c) to determine whether changes in SC over 4 years predicted patient recovery at follow-up. Methods The reliable change index was used to estimate the proportion of true change in SC, not attributable to measurement error. Stepwise multiple logistic regression models were used to identify the predictors of RCSC in a SC domain (The Awareness of Social Inference Test [TASIT]) and the effect of change in TASIT on recovery at follow-up. Results In 548 participants, statistically significant improvements were found for the simple and paradoxical sarcasm of TASIT scale, and for the total score of section 2. The reliable change index was 9.8. A cut-off of 45 identified patients showing clinically significant change. Reliable change was achieved by 12.6% and RCSC by 8% of participants. Lower baseline TASIT sect. 2 score predicted reliable improvement on TASIT sect. 2. Improvement in TASIT sect. 2 scores predicted functional recovery, with a 10-point change predicting 40% increase in the probability of recovery. Conclusions The RCSC index provides a conservative way to assess the improvement in the ability to grasp sarcasm in SZ, and is associated with recovery.