Evidence has been accumulating for an immune-based component to the etiology of psychotic disorders. Advancements in diffusion magnetic resonance imaging (MRI) have enabled estimation of extracellular free water (FW), a putative biomarker of neuroinflammation. Furthermore, inflammatory processes may be associated with altered brain levels of metabolites, such as glutathione (GSH). Consequently, we sought to test the hypotheses that FW is increased and associated with decreased GSH in patients with first-episode schizophrenia (SZ) compared with healthy controls (HC). SZ (n = 36) and HC (n = 40) subjects underwent a multi-shell diffusion MRI scan on a Siemens 3T scanner. 1H-MR spectroscopy data were acquired using a GSH-optimized MEGA-PRESS editing sequence and GSH/creatine ratios were calculated for DLPFC (SZ: n = 33, HC: n = 37) and visual cortex (SZ: n = 29, HC: n = 35) voxels. Symptoms and functioning were measured using the SANS, SAPS, BPRS, and GSF/GRF. SZ demonstrated significantly elevated FW in whole-brain gray (p = .001) but not white matter (p = .060). There was no significant difference between groups in GSH in either voxel. However, there was a significant negative correlation between DLPFC GSH and both whole-brain and DLPFC-specific gray matter FW in SZ (r = -.48 and -.47, respectively; both p < .05), while this relationship was nonsignificant in HC and in both groups in the visual cortex. These data illustrate an important relationship between a metabolite known to be important for immune function-GSH-and the diffusion extracellular FW measure, which provides additional support for these measures as neuroinflammatory biomarkers that could potentially provide tractable treatment targets to guide pharmacological intervention.