The wide variety of lesbian families who became visible during the past 20 years gave rise to important practical and theoretical questions. Up to now society has treated lesbian mothers differently with regard to a number of child-issues. In the past, divorcing lesbian mothers were often denied child custody because of their sexual orientation and the majority of fertility centers still refuse lesbian couples in their donor insemination programs. The present article reviews whether there is any theoretical and empirical evidence for the most widespread assumptions on which such decisions have been based. A number of psychological theories, such as psychoanalytic theory, social and cognitive learning theory and attachment theory are discussed with regard to the two most salient features of lesbian families; the absence of a father and the homosexual orientation of the mother. Meanwhile, there is a growing body of empirical research investigating a variety of aspects of child development, such as gender development, emotional/behavioral adjustment and social competence. Most of these studies involved children of divorced lesbian mothers who spent their early years in a heterosexual household. More recently, however, studies were sporadically carried out among children who were raised from birth in a lesbian relationship. As early childhood experiences are believed to have an important impact on future development, the study of these newly created families provides a challenge for existing psychological theories. Although many important research questions have yet to be addressed, the results of all reviewed studies were unanimous; none of the investigations could identify an adverse effect of lesbian motherhood on child development.