Considering the nonlinear dynamic nature of emotion recognition, it is believed to be strongly dependent on temporal context. This can be investigated by resorting to the phenomenon of hysteresis, which features a form of serial dependence, entailed by continuous temporal stimulus trajectories. Under positive hysteresis, the percept remains stable in visual memory (persistence) while in negative hysteresis, it shifts earlier (adaptation) to the opposite interpretation. Here, we asked whether positive or negative hysteresis occurs in emotion recognition of inherently ambiguous biological motion, while testing for the controversial debate of a negative versus positive emotional bias. Participants (n = 22) performed a psychophysical experiment in which they were asked to judge stimulus transitions between two emotions, happiness and sadness, from an actor database, and report perceived emotion across time, from one emotion to the opposite as physical cues were continuously changing. Our results reveal perceptual hysteresis in ambiguous emotion recognition, with positive hysteresis (visual persistence) predominating. However, negative hysteresis (adaptation/fatigue) was also observed in particular in the direction from sadness to happiness. This demonstrates a positive (happiness) bias in emotion recognition in ambiguous biological motion recognition. Finally, the interplay between positive and negative hysteresis suggests an underlying competition between visual persistence and adaptation mechanisms during ambiguous emotion recognition.