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Poverty and threat exposure (TE) predict deficits in emotion regulation (ER). Effective cognitive ER (i.e., reappraisal) may be supported by: (1) cognitive processes implicated in generating and implementing cognitive reappraisal, supported by activation in brain regions involved in cognitive control (e.g., frontal, insular, and parietal cortices) and (2) emotion processing and reactivity, involving identification, encoding, and maintenance of emotional states and related variation in brain activity of regions involved in emotional reactivity (i.e., amygdala). Poverty is associated with deficits in cognitive control, and TE with alterations in emotion processing and reactivity. Our goal was to identify dissociable emotional and cognitive pathways to ER deficits from poverty and TE. Measures of cognitive ability, emotional processing and reactivity, ER, and neural activity during a sadness ER task, were examined from a prospective longitudinal study of youth at risk for depression (n = 139). Both cognitive ability and left anterior insula extending into the frontal operculum activity during a sadness reappraisal task mediated the relationship between poverty and ER. Emotion processing/reactivity didn’t mediate the relationship of TE to ER. Findings support a cognitive pathway from poverty to ER deficits. They also underscore the importance of dissociating mechanisms contributing to ER impairments from adverse early childhood experiences.