Behavioral studies indicate that socially phobic individuals process faces depicting prototypic angry expressions differently than normal controls. Little evidence exists, however, concerning the processing of neutral (or ambiguous) facial expressions in social phobia. Here, we extend these findings by combining behavioral measures with event-related brain potentials (ERPs) to investigate how socially phobic individuals differentially process emotional and neutral faces. Specifically, we measured the P300, an ERP indexing attentional allocation, while socially phobic and control participants viewed pictures of neutral, angry and happy faces. Following ERP recording, participants made judgments regarding each face on both valence and arousal dimensions. Although there were no group differences on subjective ratings of the faces, the P300 results indicated that controls, but not social phobics, preferentially allocated attentional resources, as indexed by the P300, to arousing (i.e., angry and happy) over neutral faces; P300s in the social phobic group were identical for neutral, angry, and happy faces. The current findings underscore the utility of ERPs in elucidating information processing biases in social phobia as well as social phobics’ preferential bias to treat neutral (or ambiguous) facial expressions as motivationally significant.