Mood variability, the day-to-day fluctuation in mood, differs between individuals and develops during adolescence. Because adolescents show higher mood variability and average mood than children and adults, puberty might be a potential biological mechanism underlying this increase. The goal of this preregistered developmental study was to examine the neural and hormonal underpinnings of adolescent-specific within-person changes in mood variability, with a specific focus on testosterone, cortisol, pubertal status, and resting-state functional brain connectivity. Data from two longitudinal cohorts were used: the L-CID twin study (aged 7-13, N at the first timepoint = 258) and the accelerated Leiden Self-Concept study (SC; aged 11-21, N at the first timepoint = 138). In both studies resting-state functional magnetic resonance imaging (rs-fMRI) data was collected, as well as daily mood. Additionally, in the SC study self-reported puberty testosterone and cortisol were collected. Random intercept cross-lagged panel models (RI-CLPM) were used to study the within-person relations between these biological measures and mood variability and average mood. Mood variability and average mood peaked in adolescence and testosterone levels and self-reported puberty also showed an increase. Connectivity between prefrontal cortex (dlPFC and vmPFC) and subcortical regions (caudate, amygdala) decreased across development. Moreover, higher testosterone predicted average negative mood at the next time point, but not vice versa. Further, stronger vmPFC-amygdala functional connectivity predicted decreases in mood variability. Here, we show that brain connectivity during development is an important within-person biological mechanism of the development of mood in adolescents. PRACTITIONER POINTS: Mood variability peaks in adolescence. Within-person changes in testosterone predict within-person changes in mood. Within-person changes in vmPFC-amygdala connectivity predict within-person changes in mood variability.