Schizophrenia (SCZ) and bipolar disorder (BP) are associated with neuropathological brain changes, which are believed to disrupt connectivity between brain processes and may have common properties. Patients at first psychotic episode are unique, as one can assess brain alterations at illness inception, when many confounders are reduced or absent. SCZ (N=25) and BP (N=24) patients were recruited in a regional first episode psychosis MRI study. VBM methods were used to study gray matter (GM) and white matter (WM) differences between patient groups and case by case matched controls. For both groups, deficits identified are more discrete than those typically reported in later stages of illness. SCZ patients showed some evidence of GM loss in cortical areas but most notable were in limbic structures such as hippocampus, thalamus and striatum and cerebellum. Consistent with disturbed neural connectivity WM alterations were also observed in limbic structures, the corpus callosum and many subgyral and sublobar regions in the parietal, temporal and frontal lobes. BP patients displayed less evidence of volume changes overall, compared to normal healthy participants, but those changes observed were primarily in WM areas which overlapped with regions identified in SCZ, including thalamus and cerebellum and subgyral and sublobar sites. At first episode of psychosis there is evidence of a neuroanatomical overlap between SCZ and BP with respect to brain structural changes, consistent with disturbed neural connectivity. There are also important differences however in that SCZ displays more extensive structural alteration. Copyright © 2011 Elsevier B.V. All rights reserved.