Objective: Therapists’ empathic accuracy (EA) toward their clients’ fluctuating emotions is a crucial clinical skill that underlies many therapeutic interventions. In contrast to the subjective components of empathy, limited empirical work has addressed EA or its effect on the outcomes of psychotherapy. Here, we differentiate between the components of EA (tracking accuracy, directional discrepancy) as well as the valence of the target emotions (positive vs. negative). We also investigated the relative contribution of cognitive and emotional processes to therapists’ EA and examined the associations between EA and treatment outcomes. Method: The sample comprised 93 clients treated by 62 therapists in a university setting. Prior to each session, clients self-reported their symptoms. Following each session, clients rated their positive (PE) and negative (NE) emotions during the session and therapists rated their own emotions, as well as their assessment of their clients’ emotions. Results: Therapists accurately tracked their clients’ PE and NE and were more accurate for NE. Therapists tended to overestimate their clients’ NE and underestimate their clients’ PE. Therapists’ emotions were associated with their clients’ emotions (real similarity). Therapists’ emotions were also associated with their assessments of their clients’ emotions (assumed similarity). Therapists’ own emotions partially mediated the association between clients’ emotions and therapists’ assessments. Therapists’ inaccuracy in assessing their clients’ PE was associated with higher reported symptoms in the next session. Conclusion: These findings help provide a better understanding of the specific characteristics associated with more EA and underscore the importance of EA in facilitating clients’ emotional well-being.