Recent trends towards diversity in family structure have posed important challenges for traditional social theories on the family. This critical debate has not, however, had much influence on policy discussions of the impact of diverse family structures on children's psychological health, where two-parent families are presumed ideal. In 1997, the annual Health Survey for England focussed on the health of children and young people. The Strengths and Difficulties Questionnaire (SDQ), used to assess children's psychological health, was administered to the parents of 5705 children aged 4-15 using a self-completion booklet. The effect of family structure, socio-economic indicators, parental working status and parental psychological status on children's psychological health was explored using multi-variate logistic regression models. Findings indicated that the high prevalence of psychological morbidity among children of lone-mothers was a consequence of socio-economic effects. disappearing when benefits receipt, housing tenure and maternal education were taken into account. Socio-economic factors did not, however, explain the higher proportion of psychological morbidity among children with stepparents, or the strong relationship between parents' and children's psychological morbidity.