An interpersonal stress model of depression transmission was tested in a community sample of nearly 800 depressed and never-depressed women and their 15-year-old children. It was hypothesized that maternal depression (and depression in the maternal grandmother) contributed to chronic interpersonal stress in the mothers, affecting quality of parenting and youths' social competence. In turn, poor social functioning and interpersonal life events caused at least in part by the youths were predicted to be the proximal predictors of current depressive symptoms and diagnoses. Structural equation modeling confirmed the predicted associations among variables and the link between youth chronic and episodic interpersonal stress and depression. Additionally, the association between maternal and child depression was entirely mediated by the predicted family and interpersonal stress effects.