Early Head Start children may be more likely to exhibit difficulties with social–emotional functioning due to the high-risk environments in which they live. However, positive parenting may serve as a protective factor against the influence of risk on children's outcomes. The current study examines the effects of contextual and proximal risks on children's social–emotional outcomes and whether these effects are mediated by maternal sensitivity. One-hundred and fourteen low-income, high-risk mother–toddler dyads participated in this longitudinal study designed to examine the relationships between family risk, mothers’ sensitivity, and children's social–emotional functioning in Early Head Start families. Researchers conducted two 2.5-h home visits, approximately six months apart, during which they assessed mothers’ levels of family risk, maternal sensitivity, and their children's social–emotional functioning. A theoretically derived structural equation model was tested to examine the direct paths from family risk variables to children's social–emotional functioning and the indirect paths by way of the mediator variable, maternal sensitivity. Support was found for a model that identified maternal sensitivity as a mediator of the relationship between parenting stress and children's social–emotional functioning. Results have implications for providing services through Early Head Start programs that are aimed at alleviating parenting stress and enhancing maternal sensitivity.