The social media giant shared the information with an advertiser, according to USA Today.
"We have a process in place to review the type of research we perform and in this case that process was not followed," Facebook said in a statement to the newspaper.
Facebook said advertisers cannot target users based on their emotional state, according to USA Today.
In an emailed statement to CNBC, a Facebook spokesperson said the premise of The Australian article was "misleading."
"We do not offer tools to target people based on their emotional state," the statement said. "The analysis done by an Australian researcher was intended to help marketers understand how people express themselves on Facebook. It was never used to target ads and was based on data that was anonymous and aggregated."
This isn't the first time that Facebook has been criticized for monitoring users' emotions. In 2014, it studied how nearly 700,000 people responded to changes in their news feeds, finding that positive and negative sentiments were contagious, something an expert at the time called a "terrible thing to do."
"When positive expressions were reduced, people produced fewer positive posts and more negative posts; when negative expressions were reduced, the opposite pattern occurred. These results indicate that emotions expressed by others on Facebook influence our own emotions," the paper by the Proceedings of the National Academy of Sciences of the United States of America stated.
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