The stress diathesis hypothesis is currently one of the prevailing models of etiology of psychotic disorders. Cortisol is the most researched stress hormone; yet its role in first episode psychosis (FEP) was only recently investigated. The aim of the present study is to systematically review the evidence on the potential role of cortisol in FEP. Higher cortisol levels in blood samples have been consistently replicated, whereas saliva studies measuring baseline cortisol levels have exhibited divergent results. Moreover, longitudinal studies have revealed a cortisol upregulation in FEP with a subsequent decrease induced by antipsychotic treatment. The evidence suggests a role for cortisol in psychosis, although the association of cortisol with psychopathological symptoms is currently non-specific. Future research should focus on more pure diagnostic entities, clearly defined stages of the disorder and refined methods of hormonal measurement.