AbstractChanges in brain volume are a common finding in Magnetic Resonance Imaging (MRI) studies of people with psychosis and numerous longitudinal studies suggest that volume deficits progress with illness duration. However, a major unresolved question concerns whether these changes are driven by the underlying illness or represent iatrogenic effects of antipsychotic medication. In this study, 62 antipsychotic-naïve patients with first-episode psychosis (FEP) received either a second-generation antipsychotic (risperidone or paliperidone) or a placebo pill over a treatment period of 6 months. Both FEP groups received intensive psychosocial therapy. A healthy control group (n = 27) was also recruited. Structural MRI scans were obtained at baseline, 3 months and 12 months. Our primary aim was to differentiate illness-related brain volume changes from medication-related changes within the first 3 months of treatment. We secondarily investigated long-term effects at the 12-month timepoint. From baseline to 3 months, we observed a significant group x time interaction in the pallidum (p < 0.05 FWE-corrected), such that patients receiving antipsychotic medication showed increased volume, patients on placebo showed decreased volume, and healthy controls showed no change. Across the entire patient sample, a greater increase in pallidal grey matter volume over 3 months was associated with a greater reduction in symptom severity. Our findings indicate that psychotic illness and antipsychotic exposure exert distinct and spatially distributed effects on brain volume. Our results align with prior work in suggesting that the therapeutic efficacy of antipsychotic medications may be primarily mediated through their effects on the basal ganglia.