Affect is important in motivated performance situations such as negotiation. Longstanding theories of emotion suggest that facial expressions provide enough information to perceive another person’s internal affective state. Alternatively, the contextual emotion hypothesis posits that situational factors bias the perception of emotion in others’ facial displays. This hypothesis predicts that individuals will have different perceptions of the same facial expression depending upon the context in which the expression is displayed. In this study, cardiovascular indexes of motivational states (i.e., challenge vs. threat) were recorded while players engaged in a multi-issue negotiation where the opposing negotiator (confederate) displayed emotional facial expressions (angry vs. happy); the confederate’s negotiation strategy (cooperative vs. competitive) was factorially crossed with his facial expression. During the game, participants’ eye fixations and cardiovascular responses, indexing task engagement and challenge/threat motivation, were recorded. Results indicated that participants playing confederates with incongruent facial expressions (e.g., cooperative strategy, angry face) exhibited a greater threat response, which arises due to increased uncertainty. Eye fixations also suggest that participants look at the face more in order to acquire information to reconcile their uncertainty in the incongruent condition. Taken together, these results suggest that context matters in the perception of emotion.