Previous research suggests that children gradually understand the mitigating effects of apology on damage to a transgressor's reputation. However, little is known about young children's insights into the central emotional implications of apology. In two studies, children ages 4-9 heard stories about moral transgressions in which the wrongdoers either did or did not apologize. In Study 1, children in the no-apology condition showed the classic pattern of 'happy victimizer' attributions by expecting the wrongdoer to feel good about gains won via transgression. By contrast, in the apology condition, children attributed negative feelings to the transgressor and improved feelings to the victim. In Study 2, these effects were found even when the explicit emotion marker 'sorry' was removed from the apology exchange. Thus, young children understand some important emotional functions of apology.