The inseparable nature of services necessitates that customers participate as partial employees in the service delivery and production process. Accordingly, much research related to the service industry has focused on the variable of customer participation, examining how such customer participation behavior is substantively related to service quality and satisfaction. However, existing studies have not clearly explained the interactions resulting from customer participation and the consequent emotional elements of customers, making it difficult to understand through what processes customer participation relates to positive customer outcomes. To examine the interactions at the service encounter resulting from customer participation and the emotional elements of customers, this study views the service encounter as a social exchange involving interpersonal contact and, based on Lawler's (2001) affect theory of social exchange, investigates what emotional elements customer participation generates in the relationship with service providers. The results of the study showed that customer participation, through interactions at the service encounter, forms emotional empathy (an attempt to understand the service provider)—which can be considered an overall positive emotion—and has a significant effect on encounter satisfaction, which in turn was confirmed to ultimately have a significant effect on the quality of the relationship with the service provider. In conclusion, customer participation at the service encounter was found to be a cause of forming positive emotions and to play an important role in building the customer relationships that service firms desire. Therefore, service firms need to build systems that can induce and stimulate active customer participation in the service process, and furthermore, thorough management of employees is necessary to ensure that such customer participation is linked to positive emotions during the service delivery process.