Although it is well established that Bipolar Disorder (BD) is characterized by excessive positive emotionality, the cognitive and neural processes that underlie such responses are unclear. We addressed this issue by examining the role that an emotion regulatory process called self-distancing plays in two potentially different BD phenotypes-BD with vs. without a history of psychosis-and healthy individuals. Participants reflected on a positive autobiographical memory and then rated their level of spontaneous self-distancing. Neurophysiological activity was continuously monitored using electroencephalogram. As predicted, participants with BD who have a history of psychosis spontaneously self-distanced less and displayed greater neurophysiological signs of positive emotional reactivity compared to the other two groups. These findings shed light on the cognitive and neural mechanisms underlying excessive positive emotionality in BD. They also suggest that individuals with BD who have a history of psychosis may represent a distinct clinical phenotype characterized by dysfunctional emotion regulation.