In a community sample of 52 adolescents, multilevel growth curve modeling was utilized to examine whether within-person changes in momentary mood states, and individual differences in trait emotional functioning, were related to adolescent cortisol levels in naturalistic settings. Salivary cortisol levels were measured seven times a day on two typical weekdays in conjunction with diary reports of adolescent mood states. Questionnaire reports of trait emotional functioning (depression, anxiety, and anger) were obtained, as were reports of demographic, developmental, and health control variables. After accounting for the effects of time of day and a wide range of control variables, within-person increases in state negative mood (worry/stress and anger/frustration) were significantly associated with within-person increases in cortisol. When examining trait emotional functioning, adolescents with higher levels of depressive symptoms had slightly lower basal cortisol levels, and adolescents with higher levels of trait anger had a significantly stronger cortisol response to awakening. Several developmental effects were found-adolescents at higher stages of pubertal development had daytime basal cortisol curves that were more elevated, had a steeper diurnal decline, and showed a lesser cortisol awakening response, and cortisol responses to worry/stress increased with age. Cortisol levels were also higher at moments adolescents were alone rather than with others, an effect that declined significantly with age. Cortisol levels were also higher at moments adolescents were alone rather than with others, an effect that declined significantly with age. Results suggest that ongoing transactions occur between adolescents' everyday emotional experiences and their cortisol levels, and that adolescent cortisol activity is modified by age/pubertal stage and by trait emotional functioning.