Forty Italian gay father families formed by surrogacy were compared with 40 Italian lesbian mother families formed by donor insemination, all with a child aged 3 to 9 years. Standardized interview, observational, and questionnaire measures of parenting quality, parent-child relationships, stigmatization, and children's adjustment were administered to parents, children, teachers, and a child psychiatrist. The only differences across family types indicated higher levels of stigmatization as reported by gay fathers. Externalizing and internalizing problems in both groups scored within the normal range. When family structure and processes were entered together as predictors of child adjustment, a hierarchical linear model analysis showed that factors associated with children's externalizing problems were the child's male gender, high stigmatization, and negative parenting; children's internalizing problems were higher in lesbian mother families and were predicted by stigmatization. Of note, neither gay fathers nor lesbian mothers tended to underestimate their children's adjustment problems relative to teachers. Finally, for children of gay fathers, comparison between teacher SDQ [Strengths and Difficulties Questionnaire] ratings and teacher SDQ normative data on Italian children in a similar age range showed that teachers reported children of gay fathers to show significantly fewer internalizing problems than the normative sample. No differences in children's externalizing problems emerged. A bootstrapping simulation confirmed all results, except the effect of stigmatization on child internalizing problems. Findings suggest that the practice of surrogacy by gay men has no adverse effects on child health outcomes. Implications for our theoretical understanding of child socialization and development, and law and social policy, are discussed.