This study used event-related potentials (ERPs) to investigate the effects of age on neural temporal dynamics of processing task-relevant facial expressions and their relationship to cognitive functions. Negative (sad, afraid, angry, and disgusted), positive (happy), and neutral faces were presented to 30 older and 31 young participants who performed a facial emotion categorization task. Behavioral and ERP indices of facial emotion processing were analyzed. An enhanced N170 for negative faces, in addition to intact right-hemispheric N170 for positive faces, was observed in older adults relative to their younger counterparts. Moreover, older adults demonstrated an attenuated within group N170 laterality effect for neutral faces, while younger adults showed the opposite pattern. Furthermore, older adults exhibited sustained temporo-occipital negativity deflection over the time range of 200-500 ms post-stimulus, while young adults showed posterior positivity and subsequent emotion-specific frontal negativity deflections. In older adults, decreased accuracy for labeling negative faces was positively correlated with Montreal Cognitive Assessment Scores, and accuracy for labeling neutral faces was negatively correlated with age. These findings suggest that older people may exert more effort in structural encoding for negative faces and there are different response patterns for the categorization of different facial emotions. Cognitive functioning may be related to facial emotion categorization deficits observed in older adults. This may not be attributable to positivity effects: it may represent a selective deficit for the processing of negative facial expressions in older adults.