Data from the National Institute of Child Health and Human Development Study of Early Child Care and Youth Development was used to address how cohabitation of unmarried 2-biological-parent families is associated with characteristics of young children's family environment using longitudinal assessments of maternal depression and observed parenting sensitivity collected across the child's first 2 years and mothers' reports of couple relationship conflict and ambivalence. We compared 43 cohabiting 2-biological-parent families and 877 married 2-biological-parent families, all of whom had stable relationships over the child's first 2 years. Demographic factors of lower parental education, non-White race/ethnicity, and low income characterized the cohabiting parents, in comparison with married parents. After controlling for these demographic differences, we found that stably cohabiting mothers reported more depressive symptoms and were less sensitive with their child than were married mothers. Cohabiting couple relationships were characterized by more ambivalence and conflict, each of which partially mediated associations of cohabitation with maternal depression and parenting sensitivity. (PsycINFO Database Record (c) 2009 APA, all rights reserved).