Background: The depression-inhibition hypothesis suggests that mothers' depressive symptoms undermine development because they lead children to withdraw from social contact. To test this, this study examined whether poor first-grade adjustment among children of mothers with depressive symptoms is mediated by the emergence of child withdrawal in early development. Methods: Based on 1,364 dyads, four waves of data spanning from 24 months to first grade (7 years) were used to examine paths by which children's withdrawal mediates relations between mothers' early depressive symptoms and three first-grade outcomes: social competence, academic performance, and externalizing behavior problems. Results: Structural equation modeling revealed three principal paths. First, direct relations were observed: Mothers' depressive symptoms predicted early child withdrawal and increases in child withdrawal over time, which predicted poor first-grade adjustment. Second, reciprocal relations were observed: Mothers' depressive symptoms predicted child withdrawal, which predicted increases in depressive symptoms. Third, relations via mother-child mutual responsiveness were observed: Depression-related increases in child withdrawal predicted declines in mutual responsiveness, which predicted poor first-grade adjustment. Conclusion: The findings suggest that, due to its interdependence with maternal depression and low mother-child mutual responsiveness over time, child withdrawal may play an important role in the poor first-grade adjustment of children whose mothers are high in depressive symptoms.