Young children (from birth to 5 years of age) of schizophrenic, depressed, and well mothers were studied to assess their intellectual, social, and neuropsychiatric functioning. The sample derived from predominantly black, low-income, single-parent families. An extensive battery of laboratory and home-based tests was administered three times, each 1 year apart, to test the stability of findings. Schizophrenic offspring, as a group, had more problems than others. They showed more deficits on social competence, had lower IQ's (the youngest children only), and were overrepresented in the group of children with multiple negative indices. However, both schizophrenic offspring and depressive offspring sometimes performed more poorly than children with well mothers (presence of symptoms of psychiatric disorder and certain categories of social behavior). In certain instances, the children of depressed mothers were worse off than either other group (small for age and showing less social competence at home). Deficits were found in the child-rearing environment provided by the disturbed mothers. Both schizophrenic and depressed mothers were rated as less affectively involved and less responsive than well mothers. Schizophrenic mothers were rated as providing the poorest overall environment: less play stimulation, fewer learning experiences, and less emotional and verbal involvement. The following possible protective factors were identified in the mothers: lesser severity of illness, older age, higher education, higher IQ, work experience, and presence of spouse, boyfriend, or other relative to help in child care.