Abstract Mood states strongly influence episodic memory processing, yet the neural mechanisms through which mood interacts with stimulus valence during encoding remain unclear. The present study examined how experimentally induced negative mood would modulate neural processing and behavioural outcomes during an associative memory task, and whether mindfulness intervention can alter these effects. Twenty healthy adults completed a memory-encoding (word-stimulus pairs) task in which mood induction (negative vs. neutral) prior to encoding was crossed with stimulus valence (neutral vs. negative), producing four conditions. Continuous EEG was recorded using a 64-channel system, and event-related potentials (ERPs) and oscillatory dynamics were analysed during stimulus-locked encoding epochs. After an initial retrieval session, participants were randomly assigned to either a brief mindfulness meditation intervention or an active podcast-listening control, followed by a second retrieval session. Our behavioral data indicated that, recognition accuracy, arousal, valence ratings, and confidence differed significantly across conditions. Participants formed stronger word–image associations for neutral than negative stimuli across conditions, with associative memory being most impaired when negative stimuli were encoded during a negative mood state. At the neural level, early perceptual–affective processing showed robust Mood × Valence interactions: central P200 and occipito‑parietal EPN amplitudes differentiated negative from neutral images during neutral mood, but this valence effect was markedly reduced under negative mood, indicating an early blunting of neural sensitivity to emotional content. Following the mindfulness intervention, the negative images encoded under negative mood showed the most pronounced reduction in arousal, along with heightened alpha activity during mediation. Together, these findings show that negative mood undermines associative binding and influences early stages of visual-affective processing, while mindfulness may primarily positively influence the associated affective responses.