A shallow olfactory sulcus has been reported in schizophrenia, possibly reflecting abnormal forebrain development during early gestation. However, it remains unclear whether this anomaly exists prior to the onset of psychosis and/or differs according to illness stage. In the current study, magnetic resonance imaging was used to investigate the length and depth of the olfactory sulcus in 135 ultra high-risk (UHR) individuals [of whom 52 later developed psychosis (UHR-P) and 83 did not (UHR-NP)], 162 patients with first-episode psychosis (FEP), 89 patients with chronic schizophrenia, and 87 healthy controls. While there was no group difference in the length of the sulcus, UHR-P subjects had significantly shallower olfactory sulcus at baseline as compared with UHR-NP and control subjects. The depth of this sulcus became increasingly more superficial as one moved from UHR-P subjects to FEP patients to chronic schizophrenia patients. Finally, the depth of the olfactory sulcus in the UHR-P subjects was negatively correlated with the severity of negative symptoms. These findings suggest that the altered depth of the olfactory sulcus, which exists before psychosis onset, could be predictive of transition to psychosis, but also suggest ongoing changes of the sulcus morphology during the course of the illness.