Individuals with epilepsy are at risk for social cognition deficits, including impairments in the ability to recognize nonverbal cues of emotion (i.e., emotion recognition ER skills). Such deficits are particularly pronounced in adult patients with childhood-onset seizures and are already evident in children and adolescents with epilepsy. Though these impairments have been linked to blunted neural response to emotional information in faces in adult patients, little is known about the neural correlates of ER deficits in youth with epilepsy. The current study compared ER accuracy and neural response to emotional faces during functional magnetic resonance imaging (fMRI) in youth with intractable focal epilepsy and typically developing youth. Relative to typically developing participants, individuals with epilepsy showed a) reduced accuracy in the ER task and b) blunted response to emotional faces (vs. neutral faces) in the bilateral fusiform gyri and right superior temporal gyrus (STG). Activation in these regions was correlated with performance, suggesting that aberrant response within these face-responsive regions may play a functional role in ER impairments. Reduced engagement of neural circuits relevant to processing socioemotional cues may be markers of risk for social cognitive deficits in youth with focal epilepsy. •Youth with focal epilepsy showed a deficit in the capacity to label emotion in faces.•These youth had blunted fusiform and superior temporal response to emotional faces.•In contrast, typically developing youth showed enhanced response to the same stimuli.•Enhanced neural response was positively correlated with emotion recognition capacity.