This 2½‐year, 5‐wave longitudinal study tests the hypothesis that acculturation discrepancies between Hispanic immigrant parents and adolescents would lead to compromised family functioning, which would then lead to problematic adolescent outcomes. Recent‐immigrant Hispanic parent–adolescent dyads (N = 302) completed measures of acculturation and family functioning. Adolescents completed measures of positive youth development, depressive symptoms, problem behavior, and substance use. Results indicated that Time 1 discrepancies in Hispanic culture retention, and linear trajectories in some of these discrepancies, negatively predicted adolescent positive youth development, and positively predicted adolescent depressive symptoms and binge drinking, indirectly through adolescent‐reported family functioning. The vast majority of effects were mediated rather than direct, supporting the acculturation discrepancy hypothesis. Implications for further research and intervention are discussed.