Narcissism has significant interpersonal costs, yet little research has examined behavioral and affective patterns characteristic of narcissism in naturalistic settings. Here we studied the effect of narcissistic features on the dynamic processes of interpersonal behavior and affect in daily life. We used interpersonal theory to generate transactional models of social interaction (i.e., linkages among perceptions of others’ behavior, affect, and one’s own behavior) predicted to be characteristic of narcissism. Psychiatric outpatients (N = 102) completed clinical interviews and a 21-day ecological momentary assessment protocol using smartphones. After social interactions (N = 5,781), participants reported on perceptions of their interaction partner’s behavior (scored along the dimensions of dominant–submissive and affiliative–quarrelsome), their own affect, and their own behavior. Multilevel structural equation modeling was used to examine dynamic links among behavior and affect across interactions, and the role of narcissism in moderating these links. Results showed that perceptions of others’ dominance did not predict dominant behavior, but did predict quarrelsome behavior, and this link was potentiated by narcissism. Furthermore, the link between others’ dominance and one’s own quarrelsome behavior was mediated by negative affect. Moderated mediation was also found: Narcissism amplified the link between ratings of others’ dominance and one’s own quarrelsomeness and negative affect. Narcissism did not moderate the link between other dominance and own dominance, nor the link between other affiliation and own affiliation. These results suggest that narcissism is associated with specific interpersonal and affective processes, such that sensitivity to others’ dominance triggers antagonistic behavior in daily life.