Children with narrow phenotype bipolar disorder (NP-BD; i.e., history of at least one hypomanic or manic episode with euphoric mood) are deficient when labeling face emotions. It is unknown if this deficit is specific to particular emotions, or if it extends to children with severe mood dysregulation (SMD; i.e., chronic irritability and hyperarousal without episodes of mania). Thirty-nine NP-BD, 31 SMD, and 36 control subjects completed the emotional expression multimorph task, which presents gradations of facial emotions from 100% neutrality to 100% emotional expression (happiness, surprise, fear, sadness, anger, and disgust). Groups were compared in terms of intensity of emotion required before identification occurred and accuracy. Both NP-BD and SMD youth required significantly more morphs than controls to label correctly disgusted, surprised, fearful, and happy faces. Impaired face labeling correlated with deficient social reciprocity skills in NP-BD youth and dysfunctional family relationships in SMD youth. Compared to controls, patients with NP-BD or SMD require significantly more intense facial emotion before they are able to label the emotion correctly. These deficits are associated with psychosocial impairments. Understanding the neural circuitry associated with face-labeling deficits has the potential to clarify the pathophysiology of these disorders.