Low self-efficacy is a key component of depression. Toddlers of depressed mothers may be at risk for impaired development of self-efficacy because of maternal modeling, diminished encouragement of toddlers' efforts, and/or biological contributions. We examined emerging self-efficacy in 70 toddlers of depressed mothers and 62 toddlers of nondepressed mothers. Depressed mothers had sought treatment and were diagnosed using a structured psychiatric interview. Toddlers were observed while working on a variety of mastery tasks, and an index of self-efficacy was constructed from behavior and affect. As expected, findings indicated that toddlers of depressed mothers showed less self-efficacy. Furthermore, more recent exposure to depression was associated with lower self-efficacy. These findings extend downward in age prior work indicating lower self-efficacy in children of depressed mothers. Early impairment in self-efficacy may place children at risk for later depression and thus may be one pathway for the intergenerational transmission of depression.