Investigated the association between family functioning and conflict and their links with mood disorder in parents and with children's risk for bipolar disorder. Participants were 272 families with a child between the ages of 5-17 years. Parents' history of psychiatric diagnoses and children's current diagnoses were obtained via semi-structured interviews. Parent report on the Family Assessment Device and the Conflict Behavior Questionnaire measured family functioning and conflict, respectively. Results revealed a small but significant indirect pathway from parental diagnosis of mood disorder to child bipolar disorder through impaired family functioning, via increased family conflict. Parental mood disorders were also significantly related to other negative outcomes in children, including unipolar depression and oppositional defiant disorder. Associations between parent diagnoses and family functioning changed depending on youth age, but not youth sex.