To date, limited research has been undertaken regarding the interplay between differentiation of self (DoS), parental involvement, and the prevalence of psychological symptoms in emerging adults (EA) aged between 18 and 25 years in Australia. The current study aims to assess whether there is an association between mental health symptoms, perceptions of parental warmth, involvement, and autonomy support and indicators of DoS, including self‐regulation capacity and emotional reactivity. In a study of 129 undergraduate students aged between 18 and 30 years, greater DoS, involving both lower emotional reactivity and the ability to take an ‘I position’ in relation to others, was found to be associated with fewer depressive and anxiety symptoms in EA. In addition, EA who demonstrated lower levels of emotional reactivity (higher DoS) had lower scores in depressive and anxiety symptoms. Parenting variables of caregiver warmth and autonomy granting were also found to be related to lower depressive and anxiety symptoms as well as greater DoS in EA. Regression models show that there were main effects for DoS on depressive symptoms; however, parenting behaviours were not found to moderate this relationship. Overall, this research is important as it supports Bowen’s (1978) theorising in relation to the relationship between DoS and mental health, and consideration of the contribution of parenting variables to indicators of well‐being in EA. In this, family therapy has a role in educating both young adults and their parents in how best to promote independence and autonomy for improved psychological health. Further research should focus on the complexity of parenting controlling behaviours on mental health symptoms in EA.