Objective: The goal of the current study was to determine the extent to which atypical neural responsiveness during retaliation is associated with observed aggression in youth in residential care. Method: This functional magnetic resonance imaging study involved 83 adolescents (56 male and 27 female; mean age, 16.18 years) in residential care performing a retaliation task. Of the 83 adolescents, 42 displayed aggressive behavior within the first 3 months of residential care, whereas 41 did not. During the retaliation task, participants were offered either fair or unfair divisions of $20 pots (allocation phase) and could either accept the offer or reject it, and, by spending $1, $2, or $3, punish the partner (retaliation phase). Results: The study's main findings were that aggressive adolescent showed the following: reduced down-regulation of activity within regions involved in representing the expected value of choice options (left ventromedial prefrontal cortex and left posterior cingulate cortex) as a function of offer unfairness and retaliation level; and reduced recruitment of regions implicated in response control (right inferior frontal gyrus and bilateral anterior insular cortex) and associated fronto-parietal regions as a function of retaliation level. The aggressive adolescents were also significantly more likely to have been aggressive prior to residential care and showed a strong trend for increased retaliation on the task. Conclusion: We suggest that individuals with a greater propensity for aggression show reduced representation of the negative consequences of retaliation and associated reduced recruitment of regions potentially involved in over-ruling these negative consequences to engage in retaliation. Diversity & Inclusion Statement: We worked to ensure sex and gender balance in the recruitment of human participants. We worked to ensure that the study questionnaires were prepared in an inclusive way. We worked to ensure race, ethnic, and/or other types of diversity in the recruitment of human participants. We worked to ensure sex balance in the selection of non-human subjects. We actively worked to promote sex and gender balance in our author group. The author list of this paper includes contributors from the location and/or community where the research was conducted who participated in the data collection, design, analysis, and/or interpretation of the work. While citing references scientifically relevant for this work, we also actively worked to promote inclusion of historically underrepresented racial and/or ethnic groups in science in our reference list. While citing references scientifically relevant for this work, we also actively worked to promote sex and gender balance in our reference list. We actively worked to promote inclusion of historically underrepresented racial and/or ethnic groups in science in our author group.