Converging studies have revealed neural circuits for emotion processing, yet none has related activation to identification accuracy. We report a hybrid (block and event-related) fMRI study in 17 healthy adults, which permitted performance-based analysis. As in earlier studies, blocked analysis of the facial emotion identification task showed activation of amygdala, fusiform, thalamus, inferior and midfrontal regions. However, an event-related analysis of target stimuli demonstrated time locked activation associated with correct identification of happy, sad, angry and fearful faces. Overall, correct detection of angry and fearful faces was associated with greater activation compared to incorrect responses, especially in the amygdala and fusiform gyrus. The opposite was observed for happy and sad faces, where greater thalamic and midfrontal activation portended incorrect responses. Results indicate that the fusiform cortex and amygdala respond differentially in the four target conditions (happy, sad, angry and fearful) along the dimension of threat-relatedness.