The purpose of the present study was to better understand both the lateralized hemispheric processing of emotion and the differential neural processing of arousal in extraverts and introverts. We preselected right-handed male and female extraverts and introverts who were high in emotional lability. Each subject was exposed to two positive and two negative emotional stimuli under each of three counterbalanced conditions, including affective, cognitive, and neutral, while EEG and electrodermal activity (EDA) were recorded. Results showed that introverts are more aroused and that extraversion interacts with gender to produce differentiated patterns of lateralized neural activity. In addition, affective conditions produced higher levels of arousal than did cognitive or neutral conditions, particularly in the left hemisphere and under negative as opposed to positive stimuli. Finally, the hemispherically differentiated processing of positive and negative stimuli was affected by the contextual conditions under which they were experienced.