Laughter is contagious, sensitive to social context, and can be used to mitigate negative emotional states. This experiment tested whether moments of transition from negative to positive affect were associated with more laughter if in familiar compared to unfamiliar company. 90 participants (47 females, mean age 20.61 years), either familiar (N=42) or unfamiliar (N=48) to the principle researcher, were randomly assigned to listen to 44 seconds of music which induced a fearful affect, positive affect or a neutral mood, followed by 30 seconds of infectious laughter (N=30/group). Filmed facial expressions were coded for four dependent variables (duration: half smile; full smile; laugh, and extent: peak mirth) of amusement in response to the laughter. Familiar participants fully smiled for longer than unfamiliar participants (F(1,84)=4.15, p=.045). There was an affect-familiarity interaction for peak mirth (F(2,84)=4.68, p=.01), time spent half smiling F(2,84)=5.00, p=.009), and fully smiling (F(2,84)=3.48, p=.035). Post hoc analyses revealed familiar participants exhibited greater peak mirth and smiled (half and full) for longer than unfamiliar participants in the fearful affect condition. Laughter and positive emotions may be used to moderate negative arousal more amongst people known to each other than amongst strangers.