Older adults are worse than young adults at perceiving emotions in others. However, it is unclear why these age-related differences in emotion perception exist. The studies presented in this thesis investigated the cognitive, emotional and motivational factors influencing age differences in emotion perception. Study 1 revealed no age differences in mood congruence effects: sad faces were rated as more sad when participants experienced negative mood. In contrast, Study 2 demonstrated that sad mood impaired recognition accuracy for sad faces. Together, findings suggested that different methods of assessing emotion perception engage the use of discrete processing strategies. These mood influences on emotion perception are similar in young and older adults. Studies 3 and 4 investigated age differences in emotion perception tasks which are more realistic and contextualised than still photographs of facial expressions. Older adults were worse than young at recognising emotions from silent dynamic displays; however, older adults outperformed young in a film task that displayed emotional information in multiple modalities (Study 3). Study 4 suggested that the provision of vocal information was particularly beneficial to older adults. Furthermore, vocabulary mediated the relationship between age and performance on the contextual film task. However, age-related deficits in decoding basic emotions were established in a separate multi-modal video-based task. In addition, age differences in the perception of neutral expressions were also examined. Neutral expressions were interpreted as displaying positive emotions by older adults. Using a dual-task paradigm, Study 5 suggested that working memory processes are involved in decoding emotions. However, age-related declines in working memory were not driving age effects in emotion perception. Neuropsychological, motivational and cognitive explanations for these results are evaluated. Implications of these findings for older adults' social functioning are discussed.