OBJECTIVE: Response to treatment in child and adolescent affective disorders is variable, with limited ability of any one treatment to improve outcome across patients. Unfortunately, we know little about the factors that explain this variability in treatment response. Individual differences in the social and affective dynamics of daily life could help to elucidate the characteristics of youth who respond to treatment. METHODS: We used ecological momentary assessment of negative affect, positive affect, and companions in natural settings over 4 days in a sample of young people with depressive and anxiety disorders who participated in an 8-week open trial of cognitive behavioral therapy (CBT), selective serotonin reuptake inhibitors (SSRIs), or a combination of the two. Clinicians rated participants' clinical severity at five time points, and participants reported their symptoms before and after treatment. Latent growth curve models were used to predict rate of change in clinical severity from pretreatment affect in natural settings. RESULTS: Participants with high positive affect (PA), low negative affect (NA), and a high PA:NA ratio at baseline had lower severity, depressive symptoms, and anxiety symptoms at the end of treatment. Lower posttreatment symptoms were associated with spending more time with fathers and less time with peers before treatment. Although baseline affect was not associated with initial symptom severity, high NA and low PA:NA at baseline were related to slower rate of decline of severity during treatment. When baseline symptoms were included in models, NA and PA:NA predicted rate of decline in severity during treatment, whereas self-reported depressive and anxiety symptoms at baseline did not. CONCLUSION: A more typical profile of baseline affective functioning in natural settings-that is, lower NA and higher PA-and time with fathers, could provide a foundation for treatment response in children and adolescents. Affective and social dynamics in natural settings could ultimately help investigate which young people might benefit from current treatments.