Delusional paranoia has been associated with severe mental illness for over a century. Kraepelin introduced a disorder called “paranoid depression,” but “paranoid” became linked to schizophrenia, not to mood disorders. Paranoid remains the most common subtype of schizophrenia, but some of these cases, as Kraepelin initially implied, may be unrecognized psychotic mood disorders, so the relationship of paranoid schizophrenia to psychotic bipolar disorder warrants reevaluation. To address whether paranoia associates more with schizophrenia or mood disorders, a selected literature is reviewed and 11 cases are summarized. Comparative clinical and recent molecular genetic data find phenotypic and genotypic commonalities between patients diagnosed with schizophrenia and psychotic bipolar disorder lending support to the idea that paranoid schizophrenia could be the same disorder as psychotic bipolar disorder. A selected clinical literature finds no symptom, course, or characteristic traditionally considered diagnostic of schizophrenia that cannot be accounted for by psychotic bipolar disorder patients. For example, it is hypothesized here that 2 common mood-based symptoms, grandiosity and guilt, may underlie functional paranoia. Mania explains paranoia when there are grandiose delusions that one's possessions are so valuable that others will kill for them. Similarly, depression explains paranoia when delusional guilt convinces patients that they deserve punishment. In both cases, fear becomes the overwhelming emotion but patient and physician focus on the paranoia rather than on underlying mood symptoms can cause misdiagnoses. This study uses a clinical, case-based, hypothesis generation approach that warrants follow-up with a larger representative sample of psychotic patients followed prospectively to determine the degree to which the clinical course observed herein is typical of all such patients. Differential diagnoses, nomenclature, and treatment implications are discussed because bipolar patients misdiagnosed with schizophrenia are severely misserved.