Early parental loss has been associated with neuroendocrine dysregulation in youth; however, the form of cortisol dysregulation varies widely. Identifying risk and protective factors that influence physiological regulation has important implications for understanding the development of mental health problems in parentally bereaved youth. The current study investigated the prospective effects of positive parenting on the relation between recent negative life events and cortisol activity in adolescents/young adults several years after bereavement. Positive parenting was assessed an average of 18.5 months following parental death. Six years later, adolescents/young adults (N = 55) reported on exposure to recent negative life events, and salivary cortisol was assessed before and after a conflict discussion task with their caregiver. The interaction between positive parenting and exposure to recent negative events was used to predict total cortisol output and response to the task. Multilevel modeling and the probing of the interaction effect demonstrated that total cortisol output increased with greater exposure to recent negative events among those with lower levels of past positive parenting. These relations were significant over and above current internalizing and externalizing symptoms. The current results highlight the need to consider the interactive influence of proximal and distal factors on neuroendocrine functioning for youth exposed to early parental loss.