Pediatric anxiety is associated with comorbid externalizing behaviors and social problems, and these associations may be related to altered emotion processing. The late positive potential (LPP), an event-related potential component, is a neural marker of emotion processing, and there is evidence that anxious youth exhibits enhanced LPPs to threatening signals. It is unknown, however, if differences in the LPP are related to externalizing behaviors and social problems co-occurring with anxiety and if these associations are driven by altered processing of threatening (angry or fearful faces) or rewarding (happy faces) socio-emotional signals. Thus, in the present study, we examined, in a sample of 39 anxious youth, the association between LPPs, following socio-emotional signals and externalizing behaviors and social problems. Results indicated an association between attenuated LPPs in response to happy faces and greater rule-breaking and social problems. These findings suggest that differences in positive socio-emotional signal processing are related to heterogeneity in pediatric anxiety and that LPPs are a sensitive index of such heterogeneity.