As a vulnerable group, children are more prone to experiencing trauma and its sequelae. After the Asian tsunami we set out to evaluate the effect of exposure to the tsunami nearly one year after the event and to explore the family history of psychopathology on the mental health of children. This community-based study of 230 children was conducted in Srinivasapuram, a coastal village in Tamil Nadu. A youth self-report form (YSR) of the Child Behaviour Checklist (CBCL), exposure to the tsunami, post-traumatic stress disorder (PTSD) and family history of psychopathology were assessed. The severity of exposure to the tsunami correlated with anxiety and somatic domains of the DSM IV and PTSD symptoms. Family history of psychopathology correlated with affective and somatic symptoms. Multiple regression analysis revealed that family psychopathology influenced affective problems (R2 = 0.071 (n = 199), F = 15.13, p = 0.00) while exposure to the tsunami influenced anxiety problems (R2 = 0.046 (n = 208), F = 9.91, p = 0.002). The findings from this study reveal that targeted specialized mental health services are needed for children with severe exposure to the tsunami and positive family history of psychopathology.