Psychosis is often characterized by paranoia and poor social functioning. Neurally, there is evidence of functional dysconnectivity including abnormalities when processing facial affect. We sought to establish whether these abnormalities are resolved by cognitive behavioral therapy for psychosis (CBTp). The study involved 38 outpatients with one or more persistent positive psychotic symptoms, and 20 healthy participants. All participants completed an implicit facial affect processing task during functional magnetic resonance imaging (fMRI). Subsequently, patients either continued to receive standard care only (SCO, n = 16) or received CBTp on top of standard care (+CBTp, n = 22), with fMRI repeated 6-8 months later. To examine the mechanisms underlying CBTp-led changes in threat processing and appraisal, functional connectivity during the social threat (angry faces) condition was assessed separately from left amygdala and right dorsolateral prefrontal cortex (DLPFC) seeds. At baseline, patients, compared with healthy participants, showed greater amygdala connectivity with the insula and visual areas, but less connectivity with somatosensory areas. These differences normalized following CBTp and, compared with the SCO group, the +CBTp group showed greater increases in amygdala connectivity with DLPFC and inferior parietal lobule, with the latter correlating with improvement in positive symptoms. From the DLPFC seed, the +CBTp (compared with SCO) group showed significantly greater increase in DLPFC connectivity with other prefrontal regions including dorsal anterior cingulate and ventromedial prefrontal cortex. These findings indicate that CBTp strengthens connectivity between higher-order cognitive systems and those involved in threat and salience, potentially facilitating reappraisal.