Our everyday experiences occur in a continuous stream; however, we often remember these experiences as distinct events within a specific spatiotemporal context. Prior research has shown we segment experience based on context shifts (e.g. walking through a doorway). This process, termed event segmentation, further affects our memory – improving object-context binding but impairing temporal order memory. Another critical factor modulating our memory is emotion, yet the findings are less homogeneous. Surprisingly, the effects of emotion and event segmentation have not been studied together. Thus, we do not understand how these factors interact in our daily life and influence the organization of memory. To bridge this gap, we conducted two behavioural experiments using a previously validated event segmentation paradigm, now extended with emotion manipulation. We conducted the third experiment in more naturalistic settings using the virtual reality technology, where we incorporated physiological measures of pupil dilation. Across the experiments, during encoding phase, participants were sequentially presented with common objects. The objects were presented within alternating frame or wall colours to induce context shifts and accompanied by neutral or aversive sounds to manipulate emotion. At retrieval, we assessed participants’ temporal order memory and object-context binding. Our findings revealed a dichotomy in the effects of emotion and event segmentation on episodic memory. Temporal order memory was improved by emotion but weakened by event segmentation. Conversely, object-context binding was strengthened by event segmentation but weakened by emotion. These insights increase our understanding of the mechanisms guiding episodic memory organization with perceptual changes and emotion interacting.