Bidirectional links between sleep quality and emotional experiences are complex and not yet well understood—especially in old age when substantial changes occur in sleep and emotional experiences. Because previous research rarely considered the role of stressors, we examine if older adults’ sleep quality is directly associated with subsequent negative affect (NA) or more indirectly via affective reactivity to stressors. Specifically, we investigate whether and how older adults’ sleep quality predicts negative affect and affective reactivity to stress on the following day, and vice versa. For seven consecutive days, 325 older adults (61–90 years, 49% women) reported their sleep quality each morning as well as momentary negative affect and stressful events multiple times a day. Results from multilevel structural equation models showed that after nights of lower sleep quality, older adults reported more negative affect, but not higher affective reactivity to stressors. In turn, after days with increased affective reactivity but not more negative affect, participants reported worse sleep quality. We discuss whether older adults are able to regulate the effects of low sleep quality, but have difficulties downregulating stress and its effects on sleep.