A core mission of developmental psychopathology is studying the interplay between normal and abnormal developmental processes. Working from this perspective, we review research on associations between competence and psychopathology as divided among three major areas: (1) functional impairment in the context of formal mental disorder classification systems as a parallel to the negative extreme of competence; (2) cascade models that test longitudinal cross‐domain links between constructs with statistical controls for continuity and potential common‐cause variables; and (3) preventive interventions aimed at promoting competent adaptation. Each of these areas shows compelling examples of the dynamic interplay between competence in age‐salient developmental tasks and either broad dimensions of psychopathology or discrete mental disorders. We begin with a historical and theoretical discussion of the nature of competence and psychopathology and conclude with an overview of this broad domain and suggestions for future work. Throughout the chapter, we emphasize the interdependence of theory and statistical methodology.