BACKGROUND: Patients with schizophrenia often experience problems regulating their emotions. Non-affected relatives show similar difficulties, although to a lesser extent, and the neural basis of such difficulties remains to be elucidated. In the current paper we investigated whether schizophrenia patients, non-affected siblings and healthy controls (HC) exhibit differences in brain activation during emotion regulation. METHODS: All subjects (n = 20 per group) performed an emotion regulation task while they were in an fMRI scanner. The task contained two experimental conditions for the down-regulation of emotions (reappraise and suppress), in which IAPS pictures were used to generate a negative affect. We also assessed whether the groups differed in emotion regulation strategies used in daily life by means of the emotion regulation questionnaire (ERQ). RESULTS: Though the overall negative affect was higher for patients as well as for siblings compared to HC for all conditions, all groups reported decreased negative affect after both regulation conditions. Nonetheless, neuroimaging results showed hypoactivation relative to HC in VLPFC, insula, middle temporal gyrus, caudate and thalamus for patients when reappraising negative pictures. In siblings, the same pattern was evident as in patients, but only in cortical areas. CONCLUSIONS: Given that all groups performed similarly on the emotion regulation task, but differed in overall negative affect ratings and brain activation, our findings suggest reduced levels of emotion regulation processing in neural circuits in patients with schizophrenia. Notably, this also holds for siblings, albeit to a lesser extent, indicating that it may be part and parcel of a vulnerability for psychosis.