Background and objectives: People who experience auditory hallucinations tend to show weak reality discrimination skills, so that they misattribute internal, self-generated events to an external, non-self source. We examined whether inducing negative affect in healthy young adults would increase their tendency to make external misattributions on a reality discrimination task. Methods: Participants (N = 54) received one of three mood inductions (one positive, two negative) and then performed an auditory signal detection task to assess reality discrimination. Results: Participants who received either of the two negative inductions made more false alarms, but not more hits, than participants who received the neutral induction, indicating that negative affect makes participants more likely to misattribute internal, self-generated events to an external, non-self source. Limitations: These findings are drawn from an analogue sample, and research that examines whether negative affect also impairs reality discrimination in patients who experience auditory hallucinations is required. Conclusions: These findings show that negative affect disrupts reality discrimination and suggest one way in which negative affect may lead to hallucinatory experiences.