Background: Understanding the processes by which genetic risks lead to psychopathology is a key conceptual and methodological task for research. The current study, based on an at-risk adoption design, examines the hypothesis that the effect of genetic risk on children's behavioral/emotional problems and social adjustment is moderated by psychosocial risk, specifically parental separation. Method: Data are based on the Colorado Adoption Project. One hundred and seventy-one adoptees, all of whom were placed in the adoptive home in early infancy, were assessed using a multi-method strategy at 12 years of age. Adoptees' adjustment was measured using parent and teacher reports on the Child Behavioral Checklist as well as observer ratings of social competence; all raters were blind to the biological background of the adoptee. Genetic risk was indexed by biological parents' self-reports of negative emotionality, which was completed prior to the adoption. Results: By age 12 years, 23 of the 171 adoptees experienced a separation in the adoptive home. Correlation and regression analyses indicated that the association between genetic risk and child adjustment was moderated by parental separation. In the absence of parental separation, genetic risk was uncorrelated with adoptee adjustment; however, there were substantial and significant associations between individual differences in genetic diathesis and poor adjustment among the adoptees who experienced parental separation. Conclusions: The association between parental separation and children's behavioral/emotional and social adjustment may not be entirely environmental in origin. Genetic vulnerability is accentuated by major psychosocial stresses, and this may partly explain the wide individual differences in children's adjustment to family transitions.