Growing up with a mentally ill parent is associated with multiple and far-reaching developmental risks for children. The intergenerational transmission of parental mental disorders is influenced by a variety of risk and protective factors as well as mediating mechanisms both on the part of the parents and children and in the social environment. The influence of parental psychopathology is particularly strong in the first years of life, but also affects development in childhood and adolescence and can have a lifelong negative impact on mental health. Due to the diverse and long-term effects on child development, the identification of transmission factors and the development of prevention and intervention strategies as early as possible are highly relevant in order to reduce the far-reaching negative consequences for the development of the offspring. Possible starting points for this include identified risk and protective factors as well as mediating mechanisms between parental psychopathology and child development. These factors and their effects on early child development are presented in this narrative review based on the current state of research. In addition, research gaps are identified and implications for the development of early interventions are discussed.