An earlier cross-sectional study indicated that children's health and adjustment is at risk when their parents are depressed. Here, we report the associated longitudinal changes in children and families when parental depression either remits or continues. Comparisons are made among three groups established at a 1-year follow-up: previously depressed parents whose symptoms have remitted (N = 34 remitted parents), previously depressed parents who continue to be depressed (N = 23 nonremitted parents), and sociodemographically matched control families (N = 95). Although remitted parents and their family social environments improved, their children were still functioning more poorly than children of controls. Both the children and the families of nonremitted parents continued to function more poorly than controls. A social-environmental framework indicates that parents' functioning as well as family stressors and resources are concurrently and predictively linked to children's health.