Alterations in the balance between prior expectations and sensory evidence may account for faulty perceptions and inferences leading to psychosis. However, uncertainties remain about the nature of altered prior expectations and the degree to which they vary with the emergence of psychosis. We explored how expectations arising at two different levels-cognitive and perceptual-influenced processing of sensory information and whether relative influences of higher- and lower-level priors differed across people with prodromal symptoms and those with psychotic illness. In two complementary auditory perception experiments, 91 participants (30 with first-episode psychosis, 29 at clinical risk for psychosis, and 32 controls) were required to decipher a phoneme within ambiguous auditory input. Expectations were generated in two ways: an accompanying visual input of lip movements observed during auditory presentation or through written presentation of a phoneme provided prior to auditory presentation. We determined how these different types of information shaped auditory perceptual experience, how this was altered across the prodromal and established phases of psychosis, and how this relates to cingulate glutamate levels assessed by magnetic resonance spectroscopy. The psychosis group relied more on high-level cognitive priors compared to both healthy controls and those at clinical risk for psychosis and relied more on low-level perceptual priors than the clinical risk group. The risk group was marginally less reliant on low-level perceptual priors than controls. The results are consistent with previous theory that influences of prior expectations in perceptions in psychosis differ according to level of prior and illness phase. (PsycInfo Database Record (c) 2020 APA, all rights reserved).