Background Short sleep duration is highly prevalent in adolescence, and it prospectively predicts problems with emotional adjustment and psychiatric health. To move beyond epidemiological associations and inform models of developmental psychopathology, we experimentally restricted sleep to observe impacts on affective functioning. Based on the importance of social contexts to adolescent emotional experiences, we also examined the impact of restricted sleep on socioaffective functioning in an ecologically valid peer interaction task. Methods In Study 1, adolescents (ages 11.5–15.0, n = 48) were randomly assigned to two nights of polysomnography‐monitored sleep restriction (4 hr in bed) or extension (10 hr in bed). One week later, they completed the other sleep manipulation. Affective functioning was assessed by self‐report and pupil response to standardized affective sounds. Study 2 used a similar protocol and invited adolescents (ages 12–15.0, n = 16) to the sleep laboratory along with 2–4 friends to observe affective behavior in a social context primed for peer conflict. Mixed effects models were used to evaluate the effect of sleep condition on affective outcomes. Results Study 1 demonstrated increased negative affect following sleep restriction, relative to extension, on self‐report (p = .02) and pupil measures (p = .01). Study 2 replicated these effects (both p = .04) and demonstrated greater negative affective behavior in a peer social context (p = .01). Exploratory analyses for positive affect showed reductions as assessed by self‐report (p = .005), but not pupil (p = .81), in Study 1; and no significant effects in Study 2 (self‐report, p = .14; pupil, p = .29; positive affective behavior, p = .43). Conclusions Experimental sleep restriction in adolescence impacts negative affective functioning as evidenced by self‐report and pupil reactivity, as well as observed behavior in a social context primed for peer conflict. Implications for the impact of short sleep on developmental trajectories of emotional adjustment and psychiatric health, and opportunities for early intervention, are briefly discussed.