Exploring an ecological framework, the goal of the present study was to examine the moderating role of contextual risk on the relationship between differential parenting and children's socio-emotional outcomes. The present study was conducted with a sample of 920 children nested within 397 families (including up to four children per family). Using a multivariate multilevel modelling strategy, we examined a range of contextual risks including maternal personal factors (educational level, family-average parenting, depression, history of abuse and teen motherhood), parental and family factors (lone-parent and step-parent families and marital conflict) and home and community factors (household disorganization neighbourhood quality, collective efficacy and personal safety/victimization). Overall, the moderating role of context was found to be more evident for differential negativity than for differential positivity. Moreover, higher levels of contextual risk were associated with stronger links between differential parenting and child outcomes, with more deleterious effects for the disfavoured child. This same effect was seen when individual risks were aggregated into a cumulative risk index. The exception to this pattern was household disorganization in some cases, children showed more sensitivity to differential parenting at low levels of household disorganization. Copyright © 2012 John Wiley & Sons, Ltd.