Existing behavioral studies have suggested that individuals with early life stress usually show abnormal emotional processing. However, limited event-related brain potentials (ERPs) evidence was available to explore the emotional processes in children orphaned by parental HIV/AIDS (“AIDS orphans”). The current study aims to investigate whether there are behavioral and neurological obstacles in the recognition of emotional faces in AIDS orphans and also to further explore the processing stage at which the difference in facial emotion recognition exists. A total of 81 AIDS orphans and 60 non-orphan children were recruited through the local communities and school systems in Henan, China. Participants completed a computer version of the rapid serial visual presentation (RSVP) task while recording ERPs. Behavioral results showed that orphans displayed higher response accuracy and shorter reaction time than the control (p < 0.05). As for the ERPs analysis, the attenuated amplitude of N170 (i.e., an early component sensitive to facial configuration) was observed in AIDS orphans compared to the non-orphan control with happy and neutral faces; P300 (i.e., an endogenous component for affective valence evaluation in emotional processing) also showed significant differences in parietal lobe between groups, the non-orphan control group produced larger P300 amplitudes than orphans (p < 0.05). The results suggested that compared to the control group, AIDS orphans showed impaired facial emotion recognition ability with reduced brain activation.