The current study investigated the longitudinal, reciprocal associations between stressful events and psychological difficulties from early childhood to mid-adolescence. Child age, sex, prenatal maternal anxiety, and difficult temperament were tested as sources of sensitivity, that is, factors that may make children more sensitive to stressful life events. Analyses were based on data from 10,417 children from a prospective, longitudinal study of child development. At ages 4, 7, 9, 11, and 16 years, stressful events and psychological difficulties were measured. Prenatal anxiety was measured at 32 weeks of gestation and difficult temperament was measured at 6 months. Children exposed to stressful events showed significantly increased psychological difficulties at ages 7 and 11 years; there was consistent evidence of a reciprocal pattern: psychological difficulties predicted stressful events at each stage. Analyses also indicated that the associations between stressful events and psychological difficulties were stronger in girls than in boys. We found no evidence for the hypothesis that prenatal anxiety or difficult temperament increased stress sensitivity, that is, moderated the link between life events and psychological difficulties. The findings extend prior work on stress exposure and psychological difficulties and highlight the need for additional research to investigate sources of sensitivity and the mechanisms that might underlie differences in sensitivity to stressful events.