The neural substrates of pediatric posttraumatic stress disorder (PTSD) remain incompletely understood, but likely involve abnormal function and development of emotion processing circuitry. Valence-specific and age-related abnormalities during emotion processing have not been elucidated. We examined implicit emotional face processing in pediatric PTSD, predicting abnormalities specific to threat-related emotion. Youth (ages 8-18 years) with PTSD (n=25) and healthy youth (n=28) completed a dynamic emotional face task during fMRI, viewing faces changing from neutral to angry or happy, or changing shape control. Group and cross-sectional age-related differences in activation and functional connectivity were examined in amygdala/hippocampus, medial prefrontal cortex (mPFC), and whole-brain analyses. The post hoc analyses examined the relationship of neural abnormalities with symptom measures of PTSD, anxiety, and depression. Compared with decreased activation with age in healthy youth, PTSD youth showed increased amygdala activation to emotional faces with age. In a group by emotion interaction, PTSD youth showed dorsal (d)ACC hyperactivation to happy faces relative to healthy youth, with no difference for angry faces. Connectivity analyses revealed paradoxical coupling in prefrontal-amygdala circuits, including dACC-dorsomedial (dm)PFC, amygdala-dmPFC, and amygdala-ventrolateral (vl)PFC. In each case, PTSD youth showed reduced connectivity to angry faces, but increased connectivity to happy faces, the reverse of healthy youth. Valence-abnormal recruitment was associated with greater symptom severity, implicating a role in trauma-related psychopathology in youth. Notably, impaired recruitment during angry faces and heightened recruitment to happy faces may reflect increased salience and ambiguity of positive emotional expressions in pediatric PTSD. Finally, age-related findings suggest a developmental sensitization of the amygdala across emotional expressions in youth with PTSD. These findings provide novel insights into the underlying pathophysiology of pediatric PTSD, extending beyond abnormal neural responses to canonical threat.