As a critical developmental goal, emotion regulation (ER) for young children in orphanages has yet to be fully understood. This paper explores how co-experiencing of dramatic interactions in playworlds supports a child’s resolution and regulation of emotions in an institutional care setting in China. 49 hours of video data were analysed with the cultural-historical concepts of catharsis and perezhivanie. Findings show that catharsis as a crucial aspect of ER development takes the form of a triadic relationship between emotions, imagination, and drama. Together they create conditions for the child to reorganize the person-environment unity, which helps shape the child’s further development.