Recent diffusion imaging studies using free-water (FW) elimination have shown increased FW in gray matter (GM) and white matter (WM) in first-episode psychosis (FEP) and lower corrected fractional anisotropy (FAt) in WM in chronic schizophrenia. However, little is known about the longitudinal stability and clinical significance of these findings. To determine tissue-specific FW and FAt abnormalities in FEP, as part of a multicenter Spanish study, 132 FEP and 108 healthy controls (HC) were clinically characterized and underwent structural and diffusion-weighted MRI scanning. FEP subjects were classified as schizophrenia spectrum disorder (SSD) or non-SSD. Of these subjects, 45 FEP and 41 HC were longitudinally assessed and rescanned after 2 years. FA and FW tissue-specific measurements were cross-sectional and longitudinally compared between groups using voxel-wise analyses in the skeletonized WM and vertex-wise analyses in the GM surface. SSD and non-SSD subjects showed (a) higher baseline FW in temporal regions and in whole GM average (P.adj(SSD vs HC) = .003, P.adj(Non-SSD vs HC) = .040) and (b) lower baseline FAt in several WM tracts. SSD, but not non-SSD, showed (a) higher FW in several WM tracts and in whole WM (P.adj(SSD vs HC)= .049) and (b) a significant FW decrease over time in temporal cortical regions and in whole GM average (P.adj = .011). Increased extracellular FW in the brain is a reliable finding in FEP, and in SSD appears to decrease over the early course of the illness. FAt abnormalities are stable during the first years of psychosis.