During social interactions, we make inferences about people's personal characteristics based on their appearance. These inferences form a potential prejudice that can positively or negatively bias our interaction with them. Not much is known about the effects of negative bias on face perception and the ability to recognize people faces. This ability was investigated by recording event-related potentials (ERPs) from 128 sites in 16 volunteers. In the first session (encoding), they viewed 200 faces associated with a short fictional story that described anecdotal positive or negative characteristics about each person. In the second session (recognition), they underwent an old/new memory test, in which they had to distinguish 100 new faces from the previously shown faces. ERP data relative to the encoding phase showed a larger anterior negativity in response to negatively (vs. positively) biased faces, indicating an additional processing of faces with unpleasant social traits. In the recognition task, ERPs recorded in response to new faces elicited a larger FN400 than to old faces, and to positive than negative faces. Additionally, old faces elicited a larger Old-New parietal response than new faces, in the form of an enlarged late positive (LPC) component. An inverse solution SwLORETA (450-550 ms) indicated that remembering old faces was associated with the activation of right superior frontal gyrus (SFG), left medial temporal gyrus, and right fusiform gyrus. Only negatively connoted faces strongly activated the limbic and parahippocampal areas and the left SFG. A dissociation was found between familiarity (modulated by negative bias) and recollection (distinguishing old from new faces).