AbstractForming positive beliefs about one’s ability to perform challenging tasks, often termed self-efficacy, is fundamental to motivation and emotional well-being. Self-efficacy crucially depends on positive social feedback, yet people differ in the degree to which they integrate such feedback into self-beliefs (i.e., positive bias). While diminished positive bias of this sort is linked to mood and anxiety, the neural processes by which positive feedback on public performance enhances self-efficacy remain unclear. To address this, we conducted a behavioral and fMRI study wherein participants delivered a public speech and received fictitious positive and neutral feedback on their performance in the MRI scanner. Before and after receiving feedback, participants evaluated their actual and expected performance. We found that reduced positive bias in updating self-efficacy based on positive social feedback associated with a psychopathological dimension reflecting symptoms of anxiety, depression, and low self-esteem. Analysis of brain encoding of social feedback showed that a positive self-efficacy update bias associated with a stronger reward-related response in the ventral striatum (VS) and stronger coupling of the VS with a temporoparietal region involved in self-processing. Together, our findings demarcate a corticostriatal circuit that promotes positive bias in self-efficacy updating based on social feedback, and highlight the centrality of such bias to emotional well-being.