During the past decade, research on how affects—including emotions, moods, and feelings—influence software developers’ performance has increased. In software development, this influence has been considered and investigated mostly in terms of individual developers. Agile development, which requires collaboration and communication, can be more prone to the influence of affects on both individuals’ and teams’ decisions. There is a lack of a tested model in the literature that explicitly reflects the influence of developers’ affects when they make decisions in Agile. Furthermore, there is no explicit evidence of the influence of positive or negative affective contagion on software teams’ cooperation or level of conflict. Therefore, this thesis develops an improved understanding and theorizes the role of affects and their contagion in Agile decision-making processes. This thesis contributes by answering the main research question, which is: how are affects and their contagion related to decision making in Agile environments? To answer this question, the thesis adopted the explanatory sequential design method, which is considered a mixed-methods approach. Within sequential design, we applied survey research as quantitative design to test the role of affects and affective contagion, and to generalize the findings, and constructive grounded theory as qualitative design to collect and analyze data, and to understand the contributing factors for the quantitative model. A total of 249 valid survey responses were collected and examined. These responses were analyzed to understand the current awareness of the impact of affects and affective contagion on Agile decisions, cooperativeness, and conflicts. Both expert and novice Agile members confirmed the influence of affects and affective contagion on Agile team decisions, cooperativeness, and conflicts; however, novices’ acknowledgement of the role tended to be significantly less than that of expert Agile members. Furthermore, the PANAS scale was provided to Agile team members to extract the most influential affective states that play a role in Agile decisions. The results showed that being determined, inspired, active, and attentive were the four positive affective states that most influence Agile individuals and teams. On the other hand, being upset and distressed were the two most influential negative affective states. Then, parts of the survey data were used to test the measurement and structural models of affect and affective contagion; and the I-PANAS-SF scale was adopted to measure participants’ affective states. The measurement models were built and tested against the collected data. After reaching an acceptable model fit with the measurement model, the structural models were built and tested against the collected data. All research hypotheses were supported by testing for the significance of direct and indirect paths. We also examined the mediators in an aggregated model and confirmed the mediation of cooperativeness and conflicts between affects and affective contagion and decision quality. A total of 16 in-depth interviews were collected and analyzed, and the constructivist grounded theory approach was adopted. As a result, a general framework, which we named “ The Framework of Affects and Affective Contagion as Influential Factors on Agile Decision-Making Processes,” was introduced and discussed. The framework articulates seven concepts; namely, conceptualizing positive and negative affects, conceptualizing positive and negative affective contagion, linking affects and affective contagion, recognizing situations in which affects influence individuals, recognizing situations in which affective contagion influence teams, acting on affects to influence affective contagion, and work- and non-work-related factors.