Negotiations are a widespread business activity. The power of humor in negotiations lies in its capacity to be used competitively and cooperatively simultaneously. It thus helps negotiators to be tough on the issue and soft on the people. In this chapter, we present the general functions of humor in negotiations and explain which linguistic cues signal humor. We then describe an important experimental study involving a pet frog that showed how humor can lead to financial concessions. Other research in this area focused on softer, socio-emotional negotiation outcomes. We then explain how one’s characteristics (such as power) and a partner’s characteristics influence the amount and type of humor used in negotiations. Because humor can change both positive and negative affect, we present relevant findings on the influence of affect in negotiations. We conclude by examining how humor functions in online negotiations.