Like other senses, our perception of time is not veridical, but rather, is modulated by changes in environmental context. Anecdotal experiences suggest that emotions can be powerful modulators of time perception; nevertheless, the functional and neural mechanisms underlying emotion-induced temporal distortions remain unclear. Widely accepted pacemaker-accumulator models of time perception suggest that changes in arousal and attention have unique influences on temporal judgments and contribute to emotional distortions of time perception. However, such models conflict with current views of arousal and attention suggesting that current models of time perception do not adequately explain the variability in emotion-induced temporal distortions. Instead, findings provide support for a new perspective of emotion-induced temporal distortions that emphasizes both the unique and interactive influences of arousal and attention on time perception over time. Using this framework, we discuss plausible functional and neural mechanisms of emotion-induced temporal distortions and how these temporal distortions may have important implications for our understanding of how emotions modulate our perceptual experiences in service of adaptive responding to biologically relevant stimuli.