This study aimed to establish potential mechanisms through which economic disadvantage contributes to the development of young children's internalizing and externalizing problems. Prospective data from fetal life to age 3 years were collected in a total of 2,169 families participating in the Generation R Study. The observed physical home environment, the provision of learning materials in the home, maternal depressive symptoms, parenting stress, and harsh disciplining practices were all analyzed as potential mediators of the association between economic disadvantage and children's internalizing and externalizing problem scores. Findings from structural equation modeling showed that for both internalizing and externalizing problems, the mechanisms underlying the effect of economic disadvantage included maternal depressive symptoms, along with parenting stress and harsh disciplining. For internalizing but not for externalizing problem scores, the lack of provision of learning materials in the home was an additional mechanism explaining the effect of economic disadvantage. The current results suggest that interventions that focus solely on raising income levels may not adequately address problems in the family processes that emerge as a result of economic disadvantage. Policies to improve the mental health of mothers with young children but also their home environments are needed to change the economic gradient in child behavior. (Contains 2 tables and 2 figures.)