Chronic exposure to ethnic–political and war violence has deleterious effects throughout childhood. Some youths exposed to war violence are more likely to act aggressively afterwards, and some are more likely to experience post-traumatic stress symptoms (PTS symptoms). However, the concordance of these two outcomes is not strong, and it is unclear what discriminates between those who are at more risk for one or the other. Drawing on prior research on desensitization and arousal and on recent social–cognitive theorizing about how high anxious arousal to violence can inhibit aggression, we hypothesized that those who characteristically experiencehigheranxious arousal when exposed to violence should display a lower increase in aggression after exposure to war violence but the same or a higher increase in PTS symptoms compared to those low in anxious arousal. To test this hypothesis, we analyzed data from our 4-wave longitudinal interview study of 1051 Israeli and Palestinian youths (ages at Wave 1 ranged from 8 to 14, and at Wave 4 from 15–22). We used the 4 waves of data on aggression, PTS symptoms, and exposure to war violence, along with additional data collected during Wave 4 on the anxious arousal participants experienced while watching a very violent film unrelated to war violence (N= 337). Longitudinal analyses revealed that exposure to war violence significantly increased both the risk of subsequent aggression and PTS symptoms. However, anxious arousal in response to seeing the unrelated violent film (measured from skin conductance and self-reports of anxiety) moderated the relation between exposure to war violence and subsequent psychological and behavioral outcomes. Those who experienced greater anxious arousal while watching the violent film showed a weaker positive relation between amount of exposure to war violence and aggression toward their peers but a stronger positive relation between amount of exposure to war violence and PTS symptoms.