Contrary to early conceptualizations of emotional experience in schizophrenia (SZ), recent research indicates that patients do not self-report less in-the-moment pleasure than controls (CN). Rather, patients report experiencing elevated levels of negative emotionality in response to a range of evocative stimuli. In this study, we examined the possibility that elevations in negative emotionality in SZ may reflect an underlying emotion regulation abnormality. Event-related potentials (ERPs) were recorded from outpatients with SZ (n = 25) and demographically matched healthy controls (n = 21) during passive viewing of unpleasant and neutral photographs. Unpleasant images were preceded by an audio description that described the image as being either negative or neutral. Neutral images were preceded by neutral audio descriptions. The late positive potential (LPP), an ERP component sensitive to cognitive change strategies, was examined as an index of emotion regulation. Both CN and SZ showed an increased LPP to negatively described unpleasant images compared with neutral images. In addition, CN showed evidence of emotion regulation, as reflected by a smaller LPP for unpleasant images preceded by a neutral descriptor, relative to a negative descriptor. In contrast, SZ patients showed an inability to downregulate emotional response, as evidenced by no difference in the amplitude of the LPP for unpleasant images preceded by negative or neutral descriptors. Findings provide neurophysiological evidence for an emotion regulation abnormality in SZ and suggest that failures in cognitive change may underlie increased negative emotionality in SZ.