Purpose: Early detection and intervention of mental health problems in youth are topical given that mental disorders often start early in life. Young people with emerging mental disorders however, often present with non-specific, fluctuating symptoms. Recent reports indicate a decline in social functioning (SF) as an early sign of specific emerging mental disorders such as depression or anxiety, making SF a favorable transdiagnostic approach for earlier detection and intervention. Our aim was to investigate the value of SF in relation to transdiagnostic symptoms, and as a predictor of psychopathology over time, while exploring traditional retrospective versus innovative daily diary measurements of SF in youth. Method: Participants (N = 75) were 16–25 years of age and presented early stage psychiatric symptomatology. Psychiatric symptoms, including anxiety and depression, as well as SF -both in retrospect and in daily life- were assessed at two time points and analyzed cross-sectionally and longitudinally. Results: A significant and negative association between SF and all psychiatric symptoms was found, and SF was a significant predictor of change in general psychiatric symptoms over time. Results were only significant when SF was measured traditionally retrospective. Conclusion: This study confirms a distinct relation between SF and transdiagnostic psychiatric symptoms in youth, even in a (sub)clinical population, and points towards SF as a predictor of transdiagnostic psychiatric symptoms. Further research is needed to learn more about the added value of daily life versus retrospective measurements.