Research Findings: This study examined the transactional nature of harsh parenting and emotion regulation across toddlerhood, including the moderating role of teacher sensitivity in child care. Secondary data analyses were conducted with a subsample of families from the Early Head Start Research and Evaluation Project who participated in center-based child care. Autoregressive cross-lagged path models were used to examine stability and transactional associations between observations of mothers' harsh parenting behaviors and observers' ratings of toddler emotion regulation at 14, 24, and 36 months. Teacher sensitivity was observed in children's child care classrooms and was hypothesized to attenuate the negative impact of harsh parenting on subsequent emotion regulation. Results suggested that poorer emotion regulation and increased harsh parenting at 14 months were particularly salient in setting the stage for worse parent and toddler outcomes at 36 months. Teacher sensitivity was not a significant protective factor. Practice or Policy: Results are discussed in terms of the importance of early parent-toddler interactions that match the developing regulatory needs of young toddlers as well as considering how teacher sensitivity is conceptualized and measured so programs such as Early Head Start can best meet the needs of socioeconomically disadvantaged parents and toddlers.