Daily life demands that we differentiate between a multitude of emotional facial expressions (EFEs). The mirror neuron system (MNS) is becoming increasingly implicated as a neural network involved with understanding emotional body expressions. However, the specificity of the MNS’s involvement in emotion recognition has remained largely unexplored. This study investigated whether six basic dynamic EFEs (anger, disgust, fear, happiness, sadness, and surprise) would be differentiated through event-related desynchronisation (ERD) of sensorimotor alpha and beta oscillatory activity, which indexes sensorimotor MNS activity. We found that beta ERD differentiated happy, fearful, and sad dynamic EFEs at the central region of interest, but not at occipital regions. Happy EFEs elicited significantly greater central beta ERD relative to fearful and sad EFEs within 800 - 2,000 ms after EFE onset. These differences were source-localised to the primary somatosensory cortex, which suggests they are likely to reflect differential sensorimotor simulation rather than differential attentional engagement. Furthermore, individuals with higher trait anxiety showed less beta ERD differentiation between happy and sad faces. Similarly, individuals with higher trait autism showed less beta ERD differentiation between happy and fearful faces. These findings suggest that the differential simulation of specific affective states is attenuated in individuals with higher trait anxiety and autism. In summary, the MNS appears to support the skills needed for emotion processing in daily life, which may be influenced by certain individual differences. This provides novel evidence for the notion that simulation-based emotional skills may underlie the emotional difficulties that accompany affective disorders, such as anxiety.