Categorical perception, demonstrated as reduced discrimination of within-category relative to between-category differences in stimuli, has been found in a variety of perceptual domains in adults. To examine the development of categorical perception in the domain of facial expression processing, we used behavioral and event-related potential (ERP) methods to assess discrimination of within-category (happy-happy) and between-category (happy-sad) differences in facial expressions in 7-month-old infants. Data from a visual paired-comparison test and recordings of attention-sensitive ERPs showed no discrimination of facial expressions in the within-category condition, whereas reliable discrimination was observed in the between-category condition. The results also showed that face-sensitive ERPs over occipital-temporal scalp (P400) were attenuated in the within-category condition relative to the between-category condition, suggesting a potential neural basis for the reduced within-category sensitivity. Together, these results suggest that the neural systems underlying categorical representation of facial expressions emerge during the early stages of postnatal development, before acquisition of language. (Contains 3 figures and 2 footnotes.)