Theoretical perspectives suggest that depression can have particularly detrimental consequences for the family system, and children of depressed parents may have an increased risk of negative outcomes throughout the life course. In this dissertation, I use data from the Fragile Families and Child Wellbeing survey, a longitudinal study of nearly 5,000 new and mostly unmarried parents in 20 U.S. cities, to examine the consequences of parental depression for children’s cognitive and behavioral outcomes in early childhood. The findings presented in this dissertation suggest that parental depression is consequential for young children, and that parental depression may have wide-ranging consequences for aspects of the broader family system including maternal parenting behaviors, relationship quality, and social support. This dissertation extends our understanding about the consequences of parental depression in several ways. First, I consider the pathways through which maternal depression matters for children, as little is known about the factors that mediate or moderate this association. Second, I advance our knowledge of child wellbeing by examining the dynamic nature of parental depression, and how children fare when their parents move in and out of depressive episodes. Finally, I use a representative sample of parents and their children, which allows me to pay particular attention to the importance of contextual circumstances in altering the association between depression and children’s outcomes. Understanding the variation inherent in the outcomes of children of depressed parents is particularly important, as impairments in early childhood may place children on trajectories to experience further disadvantage throughout adolescence and adulthood.