Clinical hallmarks of borderline personality disorder (BPD) include social and emotional dysregulation. We tested a model of fronto-limbic dysfunction in facial emotion processing in BPD. Groups of 12 unmedicated adults with BPD by DSM-IV and 12 demographically-matched healthy controls (HC) viewed facial expressions (Conditions) of neutral emotion, fear and anger, and made gender discriminations during rapid event-related functional magnetic resonance imaging (fMRI). Analysis of variance of Region of Interest signal change revealed a statistically significant effect of the Group-by-Region-by-Condition interaction. This was due to the BPD group exhibiting a significantly larger magnitude of deactivation (relative to HC) in the bilateral rostral/subgenual anterior cingulate cortex (ACC) to fear and in the left ACC to fear minus neutral; and significantly greater activation in the right amygdala to fear minus neutral. There were no significant between-group differences in ROI signal change in response to anger. In voxel-wise analyses constrained within these ROIs, the BPD group exhibited significant changes in the fear minus neutral contrast, with relatively less activation in the bilateral rostral/subgenual ACC, and greater activation in the right amygdala. In the anger minus neutral contrast this pattern was reversed, with the BPD group showing greater activation in the bilateral rostral/subgenual ACC and less activation in the bilateral amygdala. We conclude that adults with BPD exhibit changes in fronto-limbic activity in the processing of fear stimuli, with exaggerated amygdala response and impaired emotion-modulation of ACC activity. The neural substrates underlying processing of anger may also be altered. These changes may represent an expression of the volumetric and serotonergic deficits observed in these brain areas in BPD.