Early Head Start children may be more likely to exhibit difficulties with social-emotional functioning due to the high-risk environments in which they live. However, positive parenting may serve as a protective factor against the influence of risk on children's outcomes. The current study examines the effects of contextual and proximal risks on children's social-emotional outcomes and whether these effects are mediated by maternal sensitivity. One-hundred and fourteen low-income, high-risk mother-toddler dyads participated in this longitudinal study designed to examine the relationships between family risk, mothers' sensitivity, and children's social-emotional functioning in Early Head Start families. Researchers conducted two 2.5-h home visits, approximately six months apart, during which they assessed mothers' levels of family risk, maternal sensitivity, and their children's social-emotional functioning. A theoretically derived structural equation model was tested to examine the direct paths from family risk variables to children's social-emotional functioning and the indirect paths by way of the mediator variable, maternal sensitivity. Support was found for a model that identified maternal sensitivity as a mediator of the relationship between parenting stress and children's social-emotional functioning. Results have implications for providing services through Early Head Start programs that are aimed at alleviating parenting stress and enhancing maternal sensitivity. (Contains 4 tables and 3 figures.)