Youth with epilepsy sometimes report having a hard time forming and maintaining relationships with others. This may be due to a variety of factors, but some research has suggested that deficits in “emotion recognition’”—or, the ability to interpret emotion in others’ facial expressions or tone of voice—may make it more challenging for youth with epilepsy to navigate social interactions. Difficulties in emotion recognition tend to be more pronounced in adults with childhood-onset epilepsy, suggesting that recurrent seizures may be disrupting the integrity of brain circuits involved in this social-cognitive skill in youth. However, though previous studies had investigated the neural representation of emotional faces in adults, none had examined the neural correlates of emotional face processing in youth with epilepsy. The current study examined whether emotional faces elicited different neural response in the brains of youth with and without epilepsy—and whether such differences were related to deficits in emotion recognition. Participants completed a facial emotion recognition task, in which they were asked to identify the emotion in other teenagers’ facial expressions, while undergoing functional magnetic resonance imaging (fMRI). We found that, compared to typically-developing youth, youth with epilepsy were less accurate in the facial emotion recognition task. In addition, youth with epilepsy showed blunted activation in the fusiform gyrus and right posterior superior temporal sulcus—two regions that play an important role in the processing of faces and social information. Reduced activation in these regions was correlated with poorer accuracy in the facial emotion recognition task. Together, our results suggest that reduced engagement of brain regions involved in processing socio-emotional signals may contribute to difficulties in social cognition experienced by youth with epilepsy.