We developed an ecologically valid virtual peer interaction paradigm--the Chatroom Interact Task in which 60 pre-adolescents and adolescents (ages 9-17 years) were led to believe that they were interacting with other youth in a simulated internet chatroom. Youth received rejection and acceptance feedback from virtual peers. Findings revealed increased pupil dilation, an index of increased activity in cognitive and affective processing regions of the brain, to rejection compared to acceptance trials, which was greater for older youth. Data from a cell-phone Ecological Momentary Assessment (EMA) protocol completed following the task indicated that increased pupillary reactivity to rejection trials was associated with lower feelings of social connectedness with peers in daily life. Eyetracking analyses revealed attentional biases toward acceptance feedback and away from rejection feedback. Biases toward acceptance feedback were stronger for older youth. Avoidance of rejection feedback was strongest among youth with increased pupillary reactivity to rejection, even in the seconds leading up to and following rejection feedback. These findings suggest that adolescents are sensitive to rejection feedback and seek to anticipate and avoid attending to rejection stimuli. Furthermore, the salience of social rejection and acceptance feedback appears to increase during adolescence.