CONTEXT Youth with bipolar disorder (BD) and those with severe, nonepisodic irritability (severe mood dysregulation [SMD]) exhibit amygdala dysfunction during facial emotion processing. However, studies have not compared such patients with each other and with comparison individuals in neural responsiveness to subtle changes in facial emotion; the ability to process such changes is important for social cognition. To evaluate this, we used a novel, parametrically designed faces paradigm. OBJECTIVE To compare activation in the amygdala and across the brain in BD patients, SMD patients, and healthy volunteers (HVs). DESIGN Case-control study. SETTING Government research institute. PARTICIPANTS Fifty-seven youths (19 BD, 15 SMD, and 23 HVs). MAIN OUTCOME MEASURE Blood oxygenation level-dependent data. Neutral faces were morphed with angry and happy faces in 25% intervals; static facial stimuli appeared for 3000 milliseconds. Participants performed hostility or nonemotional facial feature (ie, nose width) ratings. The slope of blood oxygenation level-dependent activity was calculated across neutral-to-angry and neutral-to-happy facial stimuli. RESULTS In HVs, but not BD or SMD participants, there was a positive association between left amygdala activity and anger on the face. In the neutral-to-happy whole-brain analysis, BD and SMD participants modulated parietal, temporal, and medial-frontal areas differently from each other and from that in HVs; with increasing facial happiness, SMD patients demonstrated increased, and BD patients decreased, activity in the parietal, temporal, and frontal regions. CONCLUSIONS Youth with BD or SMD differ from HVs in modulation of amygdala activity in response to small changes in facial anger displays. In contrast, individuals with BD or SMD show distinct perturbations in regions mediating attention and face processing in association with changes in the emotional intensity of facial happiness displays. These findings demonstrate similarities and differences in the neural correlates of facial emotion processing in BD and SMD, suggesting that these distinct clinical presentations may reflect differing dysfunctions along a mood disorders spectrum.