Peer relationships become increasingly important during adolescence. The success of these relationships may rely on the ability to attend to and decode subtle or ambiguous emotional expressions that are common in social interactions. However, most studies examining youths' processing and labeling of facial emotion have employed adult faces and faces that depict emotional extremes as stimuli. In this study, 40 adolescents and 40 young adults viewed blends of angry-neutral, fearful-neutral, and happy-neutral faces (e.g., 100% angry, 66% angry, 33% angry, neutral) portrayed by adolescent and adult actors as electroencephalogram (EEG) was recorded. Participants also labeled these faces according to the emotion expressed (i.e., angry, fearful, happy, or neutral). The Late Positive Potential (LPP), an event-related potential (ERP) component that reflects sustained attention to motivationally salient information, was scored from the EEG following face presentation. Among adolescents, as peer-age faces moved from ambiguous (33%) to unambiguous (100%) emotional expression, the LPP similarly increased. These effects were not found when adolescents viewed emotional face blends portrayed by adult actors. Additionally, while both adolescents and young adults showed greater emotion labeling accuracy as faces increased in emotional intensity from ambiguous to unambiguous emotional expression, adolescent participants did not show greater accuracy when labeling peer-compared to adult-age faces. Together, these data suggest that adolescents attend more to subtle differences in peer-age emotional faces, but they do not label these emotional expressions more accurately than adults.