A host of animal work demonstrates that the retention benefit for emotionally aversive over neutral memories is regulated by glucocorticoid action during memory consolidation. Particularly, glucocorticoids may affect systems-level processes that promote the gradual reorganization of emotional memory traces. These effects remain largely uninvestigated in humans. Therefore, in this functional magnetic resonance imaging study we administered hydrocortisone during a polysomnographically monitored night of sleep directly after healthy volunteers studied negative and neutral pictures in a double-blind, placebo-controlled, between-subjects design. The following evening memory consolidation was probed during a recognition memory test in the MR scanner by assessing the difference in brain activity associated with memory for the consolidated items studied before sleep and new, unconsolidated items studied shortly before test (remote vs. recent memory paradigm). Hydrocortisone administration resulted in elevated cortisol levels throughout the experimental night with no group difference at recent encoding or test. Behaviorally, we showed that cortisol enhanced the difference between emotional and neutral consolidated memory, effectively prioritizing emotional memory consolidation. On a neural level, we found that cortisol reduced amygdala reactivity related to the retrieval of these same consolidated, negative items. These findings show that cortisol administration during first post-encoding sleep had a twofold effect on the first 24 h of emotional memory consolidation. While cortisol prioritized recognition memory for emotional items, it reduced reactivation of the neural circuitry underlying emotional responsiveness during retrieval. These findings fit recent theories on emotional depotentiation following consolidation during sleep, although future research should establish the sleep-dependence of this effect. Moreover, our data may shed light on mechanisms underlying potential therapeutic effects of cortisol administration following psychological trauma.