Background: Children of parents with a mental illness (COPMI) have multiple psychological and developmental risks, including an increased lifetime risk of developing a mental illness themselves. Emotion regulation (ER) has been identified as a potential underlying mechanism of the transgenerational transmission of mental disorders. This study compares ER strategies in parents with and without a mental illness and their children. Further, it aims to examine the relationship between parents and children’s psychopathology with a focus on the role of parental and child ER. Methods: Participants were 96 COPMI (77% female) and 99 children of parents without mental illness (COPWMI, 83% female) aged 4–16 years and their parents. Psychopathology and ER strategies of parents and children were assessed with a series of questionnaires. Results: Both COPMI and their parents showed significantly more psychopathology and more maladaptive and adaptive ER strategies in comparison with COPWMI and their parents. Parent and child adaptive ER strategies mediated the relationship between the psychopathology of parents and children only when child maladaptive ER strategies were low. Conclusions : The findings further our understanding of the processes by which parental psychopathology affects child outcomes. Our findings highlight the importance of implementing preventive programs that specifically target the reduction of maladaptive ER in children to interrupt the transgenerational transmission of psychopathological symptoms.