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Hippocampal circuitry has been posited to be fundamental to positive symptoms in psychosis, but its contributions to other factors important for outcome remains unclear. We hypothesized that longitudinal changes in the hippocampal circuit and concomitant changes of intracortical microstructure are altered in first episode psychosis (FEP) patients and that such changes are associated with negative symptoms and verbal memory. Longitudinal brain scans (2–4 visits over 3–15 months) were acquired for 27 FEP and 29 age- and sex-matched healthy controls. Quantitative T1 maps, sensitive to myelin content, were used to sample the microstructure of the hippocampal subfields and output circuitry (fimbria, alveus, fornix, mammillary bodies), and intracortical regions. Dynamic anatomical covariance in pair-wise regional trajectories were assessed for each subject, and graph theory was used to calculate a participation coefficient metric that quantifies the similarity/divergence between hippocampal and intracortical microstructure. The mean participation coefficient of the hippocampus was significantly reduced in FEP patients compared with controls, reflecting differences in output hippocampal regions. Importantly, lower participation coefficient of the hippocampal circuit was associated with worse negative symptoms, a relationship that was mediated by changes in verbal memory. This study provides evidence for reduced hippocampal centrality in FEP and concomitant changes in intracortical anatomy. Myelin-rich output regions of the hippocampus may be an important biological trigger in early psychosis, with cascading effects on broader cortical networks and resultant clinical profiles.