Background: Screen media activities (SMAs; e.g., watching videos, playing videogames) have become increasingly prevalent among youth as ways to alleviate or escape from negative emotional states. However, neural mechanisms underlying these processes in youth are incompletely understood. Method: Seventy-nine youth aged 11–15 years completed a monetary incentive delay task during fMRI scanning. Neural correlates of reward/loss processing and their associations with SMAs were explored. Next, brain activations during reward/loss processing in regions implicated in the processing of emotions were examined as potential mediating factors between difficulties in emotion regulation (DER) and engagement in SMAs. Finally, a moderated mediation model tested the effects of depressive symptoms in such relationships. Result: The emotional components associated with SMAs in reward/loss processing included activations in the left anterior insula (AI) and right dorsolateral prefrontal cortex (DLPFC) during anticipation of working to avoid losses. Activations in both the AI and DLPFC mediated the relationship between DER and SMAs. Moreover, depressive symptoms moderated the relationship between AI activation in response to loss anticipation and SMAs. Conclusion: The current findings suggest that DER link to SMAs through loss-related brain activations implicated in the processing of emotions and motivational avoidance, particularly in youth with greater levels of depressive symptoms. The findings suggest the importance of enhancing emotion-regulation tendencies/abilities in youth and, in particular, their regulatory responses to negative emotional situations in order to guide moderate engagement in SMAs.