Background: Children's physiological reactivity was examined as a moderator of relations between parental dysphoria and child adjustment problems, addressing gaps in the study of child characteristics as risk processes. Method: One hundred fifty-seven children (86 boys, 71 girls) were assessed twice over a two-year interval. Skin conductance level reactivity (SCLR) to inter-adult argument and problem-solving tasks was observed. Results: SCLR moderated longitudinal predictions of children's internalizing, externalizing and social adjustment problems, especially for paternal rather than maternal dysphoria. Higher SCLR predicted greater vulnerability to parental depressive symptomatology. Conclusions: Findings highlight that individual differences in children's physiological reactivity may relate to risk for adjustment problems in the context of parental depressive symptoms.