Common and distinct neural bases of Schizophrenia (SZ) and bipolar disorder (BP) have been explored using resting-state fMRI (rs-fMRI) functional connectivity (FC). However, fMRI is an indirect measure of neural activity, which is a convolution of the hemodynamic response function (HRF) and latent neural activity. The HRF, which models neurovascular coupling, varies across the brain within and across individuals, and is altered in many psychiatric disorders. Given this background, this study had three aims: quantifying HRF aberrations in SZ and BP, measuring the impact of such HRF aberrations on FC group differences, and exploring the genetic basis of HRF aberrations. We estimated voxel-level HRFs by deconvolving rs-fMRI data obtained from SZ (N = 38), BP (N = 19), and matched healthy controls (N = 35). We identified HRF group differences (P < .05, FDR corrected) in many regions previously implicated in SZ/BP, with mediodorsal, habenular, and central lateral nuclei of the thalamus exhibiting HRF differences in all pairwise group comparisons. Thalamus seed-based FC analysis revealed that ignoring HRF variability results in false-positive and false-negative FC group differences, especially in insula, superior frontal, and lingual gyri. HRF was associated with DRD2 gene expression (P < .05, 1.62 < |Z| < 2.0), as well as with medication dose (P < .05, 1.75 < |Z| < 3.25). In this first study to report HRF aberrations in SZ and BP, we report the possible modulatory effect of dopaminergic signalling on HRF, and the impact that HRF variability can have on FC studies in clinical samples. To mitigate the impact of HRF variability on FC group differences, we suggest deconvolution during data preprocessing.