CPT-AX performance deficit in schizophrenia is well documented but it is unclear what causes this impairment. Past studies have focused on the roles of sustained attention and context processing in CPT-AX but the role of working memory (WM) has not been fully examined even though encoding and maintenance of the cue in WM may be critical to CPT-AX. The major goal of this study was to investigate the effects of stimulus encoding in WM on CPT-AX. Encoding was manipulated by presenting different colored (i.e., salient) cue stimuli on 20% of the trials. WM maintenance was manipulated by varying the cue-target interstimulus interval (ISI). A control task (CPT-Single) that does not require WM but assesses sustained attention was also administered. Schizophrenia patients (SZ) were impaired compared with normal controls (CO) on the CPT-AX overall but not in CPT-Single. For both groups, CPT-AX accuracy improved on salient cue trials in the long ISI condition. In the short ISI condition, where accuracy was already high, the cue saliency effect was observed in the faster RT and SZ benefited significantly more than CO. The effect of target salience was not observed in the CPT-Single, which assesses sustained attention. These results suggest that the facilitation of WM encoding by enhancing cue salience may be a key to improving CPT-AX performance.