The authors reexamine the study of generational differences in adjustment among the children of immigrants by arguing that the country of origin defines and shapes the adaptation process across generations. Using a sample of children in Toronto, the authors demonstrate that generational differences in the mental health of children occur only in families from countries of origin at the lowest levels of economic development. Among those at the lowest levels of economic development, a mental health advantage in the first generation evolves to a disadvantage in the 2.5 generation relative to third or later generational children. Children from backgrounds characterized by higher economic development show no initial or eventual differences from the native born. Using data from the Toronto Study of Intact Families, the authors are able to explain differences among children from low economic development backgrounds specifically in terms of increasing family conflict and decreasing school involvement across generations. (Contains 1 figure, 3 tables, and 4 notes.)