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Description: The risk for developing stress-related disorders is elevated in individuals with high alexithymia, a personality trait characterized by impaired emotional awareness and interpersonal relating. However, it is still unclear how alexithymia alters perceived psychosocial stress and which neurobiological substrates are mechanistically involved. To address this question, we examined freshmen during transition to university, given that this period entails psychosocial stress and frequently initiates psychopathology. Specifically, we used a functional magnetic resonance imaging emotional face matching task to probe emotional processing in 54 participants (39 women) at the beginning of the first year at university and six months later. Furthermore, we assessed alexithymia and monitored perceived psychosocial stress and loneliness via questionnaires for six consecutive months. Perceived psychosocial stress significantly increased over time and initial alexithymia predicted subjective stress experiences via enhanced loneliness. On the neural level, alexithymia was associated with lowered amygdala responses to emotional faces, while loneliness correlated with diminished reactivity in the anterior insular and anterior cingulate cortex. Furthermore, insula activity mediated the association between alexithymia and loneliness that predicted perceived psychosocial stress. Our findings are consistent with the notion that alexithymia exacerbates subjective stress via blunted insula reactivity and increased perception of social isolation.