Background Maternal depression and contextual risks (e.g. poverty) are known to impact children's cognitive and social functioning. However, few published studies have examined how stress in the social environment (i.e. interpersonal stress) might developmentally inter‐relate with maternal depression and contextual risks to negatively affect a child in these domains. This was the purpose of the current study. Method Mother‐child pairs (n = 6979) from the Avon Longitudinal Study of Parents were the study participants. Mothers reported on depression, contextual risks, and interpersonal stress between pregnancy and 33 months child age. At age 8, the children underwent cognitive assessments and the mothers reported on the children's social cognitive skills. Results Maternal depression, contextual risks, and interpersonal stress showed strong continuity and developmental inter‐relatedness. Maternal depression and contextual risks directly predicted a range of child outcomes, including executive functions and social cognitive skills. Interpersonal stress worked indirectly via maternal depression and contextual risks to negatively affect child outcomes. Conclusion Maternal depression and contextual risks each increased interpersonal stress in the household, which, in turn, contributed to reduced child cognitive and social functioning.