To sustain or repair cooperation during a social exchange, adaptive creatures must understand social gestures and the consequences when shared expectations about fair exchange are violated by accident or intent. We recruited 55 individuals afflicted with borderline personality disorder (BPD) to play a multiround economic exchange game with healthy partners. Behaviorally, individuals with BPD showed a profound incapacity to maintain cooperation, and were impaired in their ability to repair broken cooperation on the basis of a quantitative measure of coaxing. Neurally, activity in the anterior insula, a region known to respond to norm violations across affective, interoceptive, economic, and social dimensions, strongly differentiated healthy participants from individuals with BPD. Healthy subjects showed a strong linear relation between anterior insula response and both magnitude of monetary offer received from their partner (input) and the amount of money repaid to their partner (output). In stark contrast, activity in the anterior insula of BPD participants was related only to the magnitude of repayment sent back to their partner (output), not to the magnitude of offers received (input). These neural and behavioral data suggest that norms used in perception of social gestures are pathologically perturbed or missing altogether among individuals with BPD. This game-theoretic approach to psychopathology may open doors to new ways of characterizing and studying a range of mental illnesses.