Previous research has shown that people solve insight or creative problems better when in a positive mood (assessed or induced), although the precise mechanisms and neural substrates of this facilitation remain unclear. We assessed mood and personality variables in 79 participants before they attempted to solve problems that can be solved by either an insight or an analytic strategy. Participants higher in positive mood solved more problems, and specifically more with insight, compared with participants lower in positive mood. fMRI was performed on 27 of the participants while they solved problems. Positive mood (and to a lesser extent and in the opposite direction, anxiety) was associated with changes in brain activity during a preparatory interval preceding each solved problem; modulation of preparatory activity in several areas biased people to solve either with insight or analytically. Analyses examined whether (a) positive mood modulated activity in brain areas showing responsivity during preparation; (b) positive mood modulated activity in areas showing stronger activity for insight than noninsight trials either during preparation or solution; and (c) insight effects occurred in areas that showed mood-related effects during preparation. Across three analyses, the ACC showed sensitivity to both mood and insight, demonstrating that positive mood alters preparatory activity in ACC, biasing participants to engage in processing conducive to insight solving. This result suggests that positive mood enhances insight, at least in part, by modulating attention and cognitive control mechanisms via ACC, perhaps enhancing sensitivity to detect non-prepotent solution candidates.