The aim of this investigation was to examine how physiological (cortisol reactivity) and behavioral (negative and positive emotionality) markers of susceptibility moderate the relations between a wide range of early environmental experiences (parental depression, parenting, and family stress) and preschool psychopathology, psychosocial functioning, and social competence using a multi-method approach. One hundred and fifty-six preschool-age children (ages 3-5) and their biological parents were recruited from the Washington, DC metropolitan area. Stress reactivity was assessed by collecting five salivary cortisol samples from children, which included one pre-task and four post-task samples. Observational assessments were used to assess children's temperamental emotionality and parenting behavior. Children and parents' psychopathology and psychosocial functioning were assessed using psychiatric clinical interviews. Primary caregivers reported on children's social competence. Overall, we found evidence consistent with diathesis-stress models of psychopathology. Specifically, we found that the combination of a blunted pattern of HPA axis reactivity and environments characterized by family stress, including recent stressful life events and harsh parenting, was related to higher levels of children's externalizing symptoms and lower psychosocial functioning. Additionally, we found that children with high levels of negative emotionality and who are exposed to mothers with depression had the lowest social competence. In contrast to differential susceptibility theory, we did not find evidence that children's stress reactivity and temperament rendered them more sensitive to the effects of supportive parenting. The distinct patterns of findings observed for children's stress reactivity and temperament suggest that children's physiological and behavioral reactivity reflect separate pathways of risk to environmental influences rather than indices of a shared, common system of sensitivity. Taken together, our findings highlight the critical role of the early environment, particularly for children with identified risk factors (e.g., blunted cortisol reactivity, high negative emotionality), and add to our understanding of mechanisms and pathways involved in risk for early emerging, clinically significant psychopathology and functional impairment