Theory of Mind (ToM) refers to the ability to understand the mental states (i.e., thoughts and intentions) of self and others. Numerous studies have found that people with schizophrenia are impaired on ToM tasks. The nature of this deficit, however, remains elusive given the potential affective and cognitive processing demands of these tasks and the reduced availability of cognitive resources in schizophrenia. The primary aim of the present study was to examine the extent to which affective processing and availability of general cognitive resources contribute to ToM deficits in schizophrenia. Pupillary responses were recorded as an index of processing resource allocation (greater dilation indicates greater allocation) during performance of a modified ToM task in nonpsychiatric controls (n = 47) and age- and IQ-comparable outpatients with schizophrenia (n = 49). The Hinting Task was used to assess ToM, and was modified to include an affective (high load) and neutral (medium load) condition, in which affective prosody during the hint was removed. The relationship between neurocognitive functioning and Hinting Task performance was also investigated for patients. Consistent with numerous studies, patients performed significantly worse than controls on the Hinting Task. Several findings, contrary to predictions, indicated that affective processing deficits in schizophrenia did not contribute to this impaired performance. Most importantly, patients did not demonstrate a differential deficit in the affective condition. Instead, they showed similar level of performance impairment relative to controls across conditions. Resource-limitations also cannot account for this deficit, as patients showed similar level of impairment relative to controls in the high and medium load conditions. Additionally, both groups showed significantly larger pupillary responses in the affective relative to neutral condition. These findings suggest that patients had sufficient resources available and appropriately increased resource allocation in the affective condition. Despite available resources, patients showed performance deficits in both conditions. Lastly, verbal memory, but not attention or executive functioning, was found to significantly predict Hinting Task performance for patients. In summary, while Hinting Task deficits in schizophrenia may be, at least partly, associated with neuropsychological impairment, they cannot be accounted for by affective processing deficits or reduced general cognitive resources.