Some individuals with schizophrenia report similar feelings of positive affect "in the moment" compared to control participants but report decreased trait positive affect overall. One possible explanation for this disconnection between state and trait positive affect is the extent to which individuals with schizophrenia engage in elaborative processing of positive stimuli. To assess this, we examined evoked gamma band activity in response to positive words over several seconds in a group with schizophrenia, a group with major depressive disorder, and a healthy control group. From a pre-stimulus baseline to 2000 ms after onset of the stimulus (henceforth, "early period"), the schizophrenia group showed a reliable increase in gamma activity compared to both the control and depressed groups, who did not differ from each other. In contrast, the depressed group showed a reliable increase in gamma activity from 2001 to 8000 ms (henceforth, "late period") compared to the other groups, who did not differ from each other. At the same time, the schizophrenia group showed a reliable decrease from the early to late period while the depressed group showed the opposite pattern. In addition, self-reported depression and social anhedonia in the schizophrenia group were related to decreased gamma band activity over the entire processing window. Overall, these results suggest that schizophrenia is associated with increased initial reactivity but decreased sustained elaborative processing over time, which could be related to decreased trait positive affect. The results also highlight the importance of considering depressive symptomology and anhedonia when examining emotional abnormalities in schizophrenia.