Background FK506 binding protein 5 (FKBP5) has repeatedly been shown to be a critical determinant of post-traumatic stress disorder (PTSD) and depression following childhood trauma. Aims To examine the role of FKBP5 trauma interactions in the partly stress-related psychosis phenotype. Method In 401 general population twins, four functional polymorphisms were examined in models of psychosis and cortisol, and followed up in models of psychosis in three samples at different familial liability (175 controls, 200 unaffected siblings and 195 patients with a psychotic disorder). Results The most consistent finding was an interaction between childhood trauma and rs9296158/rs4713916 on psychotic symptoms and cortisol in the twin sample, combined with a directionally similar interaction in siblings (rs4713916) and patients (rs9296158), A-allele carriers at both polymorphisms being most vulnerable to trauma. Conclusions Trauma may increase the risk of psychosis through enduring changes in the cortisol feedback loop, similar to that for PTSD, suggesting comparable biological mechanisms for psychosis across diagnostic boundaries.