Purpose It was expected that using a comprehensive scale like the Thought and Language Disorder Scale (TALD) for measurement of FTD would enable assessing its heterogeneity and its associations with cognitive impairment and functionality. This study has aimed to analyze the relationship between formal thought disorder (FTD) and cognitive functions, functionality, and quality of life in schizophrenia. Methods This cross-sectional exploratory study included 46 clinical participants meeting the DSM-5 diagnostic criteria for schizophrenia and 35 healthy individuals as the control groups. Data were acquired by means of the Turkish language version of the TALD, the Positive and Negative Syndrome Scale, the Clinical Global Impression Scale, the Functioning Assessment Short Test, the Social Functioning Scale, the World Health Organization Quality of Life Instrument-Short Form, and a neuropsychological test battery on executive functions, working memory, verbal fluency, abstract thinking, and response inhibition. Correlation analyses were conducted to detect significant relationships. Results The clinical group scored failures in all cognitive tests. The objective positive FTD was associated with deficits in executive functions and social functioning. The objective negative FTD was associated with poor performance in all cognitive domains, physical quality of life, and social and global functioning. The subjective negative FTD was negatively correlated with psychological quality of life. Conclusion This study demonstrated that objective FTD factors reflect different underlying cognitive deficits and correlate with different functioning domains. Significant correlation was determined between subjective negative FTD and psychological quality of life. Given the close relationship of FTD with functioning and quality of life, the FTD-related cognitive deficits should be the key treatment goal in schizophrenia.