Early intervention is essential for improving the prognosis in patients with first-episode schizophrenia (FES). The Mental Health Act limits involuntary hospitalization in South Korea to cases where an individual exhibits both a mental disorder and a potential for harming themselves or others, which could result in a delay in the required treatment in FES. We investigated the effect of delay in the first psychiatric hospitalization on clinical outcomes in FES. The South Korean Health Insurance Review Agency database (2012–2019) was used. We identified 15,994 patients with FES who had a record of at least one psychiatric hospitalization within 1 year from their diagnosis. A multivariate linear regression model and a generalized linear model with a gamma distribution and log link were used to examine associations between the duration from the diagnosis to the first psychiatric admission and clinical outcomes as well as direct medical costs after 2 and 5 years. Within both the 2-year and the 5-year period, longer durations from the diagnosis to the first psychiatric admission were associated with an increase in the number of psychiatric hospitalizations (2-y: B = 0.003, p = 0.003, 5-y: B = 0.007, p = 0.001) and an increase in direct medical costs (total: 2-y: B = 0.005, p < 0.001, 5-y: B = 0.004, p = 0.005; inpatient care: 2-y: B = 0.005, p < 0.001, 5-y: B = 0.004, p = 0.017). Earlier psychiatric admission from the diagnosis is associated with a decrease in the number of psychiatric admissions as well as in direct medical costs in patients with FES.