Explanations for the fact that crime tends to run in families have focused on the deprived social backgrounds of criminal parents, methods of child-rearing, modeling processes, and genetic mechanisms. However, parental involvement in the criminal justice system itself also might contribute to the intergenerational transmission of crime and have other adverse effects on children's well-being. We investigated the development of youth problem behavior in relation to parental arrest, conviction, and incarceration in the youngest and oldest samples of the Pittsburgh Youth Study, a longitudinal survey of 1,009 inner-city boys. Parental arrest and conviction without incarceration did not predict the development of youth problem behavior. Parental incarceration was not associated with increases in marijuana use, depression, or poor academic performance. However, boys experiencing parental incarceration showed greater increases in theft compared with a control group matched on propensity scores. The association between parental incarceration and youth theft was stronger for White youth than for Black youth. Parenting and peer relations after parental incarceration explained about half of its effects on youth theft. Because the effects of parental incarceration were specific to youth theft, labeling and stigma processes might be particularly important for understanding the consequences of parental incarceration for children.