Facial emotion perception is significantly affected in autism spectrum disorder, yet little is known about how individuals with autism spectrum disorder misinterpret facial expressions that result in their difficulty in accurately recognizing emotion in faces. This study examined facial emotion perception in 45 verbal adults with autism spectrum disorder and 30 age- and gender-matched volunteers without autism spectrum disorder to identify patterns of emotion misinterpretation during face processing that contribute to emotion recognition impairments in autism. Results revealed that difficulty distinguishing emotional from neutral facial expressions characterized much of the emotion perception impairments exhibited by participants with autism spectrum disorder. In particular, adults with autism spectrum disorder uniquely misinterpreted happy faces as neutral, and were significantly more likely than typical volunteers to attribute negative valence to nonemotional faces. The over-attribution of emotions to neutral faces was significantly related to greater communication and emotional intelligence impairments in individuals with autism spectrum disorder. These findings suggest a potential negative bias toward the interpretation of facial expressions and may have implications for interventions designed to remediate emotion perception in autism spectrum disorder.