Background Aberrant emotion regulation has been posited as a putative endophenotype of bipolar disorder (BD). We therefore aimed to compare the neural responses during voluntary down-regulation of negative emotions in a large functional magnetic resonance imaging study of BD, patients' unaffected first-degree relatives (URs), and healthy controls (HCs). Methods We compared neural activity and fronto-limbic functional connectivity during emotion regulation in response to aversive v. neutral pictures in patients recently diagnosed with BD (n = 78) in full/partial remission, their URs (n = 35), and HCs (n = 56). Results Patients showed hypo-activity in the left dorsomedial, dorsolateral, and ventrolateral prefrontal cortex (DMPFC and DLPFC) during emotion regulation while viewing aversive pictures compared to HCs, with URs displaying intermediate neural activity in these regions. There were no significant differences between patients with BD and HCs in functional connectivity from the amygdala during emotion regulation. However, exploratory analysis indicated that URs displayed more negative amygdala-DMPFC coupling compared with HCs and more negative amygdala-cingulate DLPFC coupling compared to patients with BD. At a behavioral level, patients and their URs were less able to dampen negative emotions in response aversive pictures. Conclusions The findings point to deficient recruitment of prefrontal resources and more negative fronto-amygdala coupling as neural markers of impaired emotion regulation in recently diagnosed remitted patients with BD and their URs, respectively.