The present study included observational and self-report measures to examine associations among parental stress, parental behaviour, child behaviour, and children's theory of mind and emotion understanding. Eighty-three parents and their 3- to 5-year-old children participated. Parents completed measures of parental stress, parenting (laxness, overreactivity), and child behaviour (internalizing, externalizing); children completed language, theory of mind, and emotion understanding measures. Parent–child interactions also were observed (N=47). Laxness and parenting stress predicted children's theory of mind performance and parental usage of imitative gestures and vocalizations accounted for unique variance in emotion understanding. Associations also were found between child behaviour and emotion understanding. Results provide support for direct and indirect associations between parent–child interactions and early social-cognitive development. Copyright © 2008 John Wiley & Sons, Ltd.