Cognitive models propose that psychosis may be consequential to threat beliefs which surface following trauma. This study investigated the mediating effect of paranoid ideation on experiences of sexual abuse and psychosis. Using a population-based sample (n = 8,580) mediation analysis indicated that the regression coefficients of paranoid ideation on sexual abuse (path a; B = .68, SE = .09, p < .05), psychosis on paranoid ideation (path b; B = .21, SE = .01, p < .05), and psychosis on sexual abuse (path c’; B = .27, SE = .07, p < .05) were all statistically significant. The mediated effect of sexual abuse on psychosis via paranoid ideation was also significant (path ab; B = .14, SE = .07, p < .05). The parameters of the model remained statistically significant after controlling for a range of potential risk factors for psychosis. Paranoia may constitute a plausible hypothesis for exploring trauma–related psychosis.