The hollow-mask illusion is an optical illusion where a concave face is perceived as convex. It has been demonstrated that individuals with schizophrenia and anxiety are less susceptible to the illusion than controls. Previous research has shown that the P300 and P600 event-related potentials (ERPs) are affected in individuals with schizophrenia. Here, we examined whether individual differences in neuroticism and anxiety scores, traits that have been suggested to be risk factors for schizophrenia and anxiety disorders, affect ERPs of healthy participants while they view concave faces. Our results confirm that the participants were susceptible to the illusion, misperceiving concave faces as convex. We additionally demonstrate significant interactions of the concave condition with state anxiety in central and parietal electrodes for P300 and parietal areas for P600, but not with neuroticism and trait anxiety. The state anxiety interactions were driven by low-state anxiety participants showing lower amplitudes for concave faces compared to convex. The P300 and P600 amplitudes were smaller when a concave face activated a convex face memory representation, since the stimulus did not match the active representation. The opposite pattern was evident in high-state anxiety participants in regard to state anxiety interaction and the hollow-mask illusion, demonstrating larger P300 and P600 amplitudes to concave faces suggesting impaired late information processing in this group. This could be explained by impaired allocation of attentional resources in high-state anxiety leading to hyperarousal to concave faces that are unexpected mismatches to standard memory representations, as opposed to expected convex faces.