Theory and research on self‐regulation, emotional adjustment, and interpersonal processes focus increasingly on parasympathetic functioning, using measures of vagally mediated heart rate variability (vmHRV) or respiratory sinus arrhythmia (RSA). This review describes models of vmHRV in these areas, and issues in measurement and analysis. We propose a framework organizing theory and research as examining (a) vmHRV as an individual difference or a situational response, and (b) resting, reactive, or recovery levels. Evidence supports interpretation of individual differences in resting vmHRV as a broad biomarker for adaptive functioning, but its specificity and underlying mechanisms require elaboration. Individual differences in vagal reactivity (i.e., trait‐like differences in vmHRV decreases during challenge or stress) are less commonly studied in adults and results are mixed. Many stressors and challenges evoke temporary decreases in vmHRV, and in some research self‐regulatory effort evokes increases. In a smaller literature, positive interpersonal experiences and some restorative processes increase resting vmHRV, whereas depletion of self‐regulatory capacity through related effort decreases it. Greater attention to conceptual distinctions regarding vmHRV constructs and several methodological issues will strengthen future research. Importantly, researchers should exercise caution in equating vmHRV with specific psychosocial constructs, especially in the absence of converging assessments and precise experimental manipulations.