Family plays an important yet understudied role in the development of psychopathology during childhood, particularly for children at developmental risk. Indeed, much of the research on families has actually concentrated more on risk processes in individual family members or within-family subsystems. In general, important and complex associations have been found among family-related constructs such as marital conflict, parent-child relationships, parental depression, and parenting stress, which have in turn been found to contribute to the emergence of children's behavioral problems. Research has begun to emerge that certain family system constructs, such as cohesion, organization, and control may influence children's development, but this research has been limited by a focus on parent-reports of family functioning, rather than utilizing observational methods. With notable exceptions, there is almost no observational research examining families of children at developmental risk. This study examined the longitudinal relations among family risk and family system constructs, as well as how family systems constructs mediated the relations between family risk and child outcome. Further, the study examined how developmental risk moderated these relations. The sample followed 242 families of children with and without developmental risk across the transition-to-school period. Family risk factors were assessed at 5 years, using parental reports of symptomatology, parenting stress, and marital adjustment, and observational assessments of the parent-child relationship. Family system constructs (cohesion, warmth, conflict, organization, control) were measured at age 6 using structured observations of the entire family playing a board game. Child behavior problems and social competence were assessed at age 7. Results indicated that families of children with developmental delays did not differ from families of typically developing children on the majority of family system attributes. Cohesion and organization mediated the relations between specific family risk factors and social competence for all families. For families of typically developing children only, higher levels of control were associated with more behavior problems and less social competence. These findings underscore the importance of family-level assessment in understanding the development of psychopathology. Important family effects on children's social competence were found, although the pathways among family risk and family systems attributes are complex.