Children's conscience, including the ability to experience guilt and engage in rule‐compatible behavior, develops across early childhood. The current study investigated whether within‐family variation in children's baseline respiratory sinus arrhythmia (RSA) and sibling conflict behavior were associated with individual differences in children's guilt and internalized conduct. Between‐family differences across sibling dyad gender compositions were also examined. A within‐family design that included 70 families with two siblings between the ages of 2 and 5 was utilized. Children's baseline RSA was measured while sitting quietly with their family. Mothers and fathers completed questionnaires that assessed siblings’ conflict behavior, guilt, and internalized conduct. Older siblings had higher levels of guilt and internalized conduct than younger siblings. Results from actor‐partner interdependence models indicated that there were no direct effects of children's baseline RSA. The interaction effects approached significance (p's ≤ .08) suggesting that older siblings’ conflict moderated the association between older siblings’ baseline RSA and both older and younger siblings’ guilt. In contrast, older siblings’ conflict was positively associated with older and younger siblings’ internalized conduct. Guilt and internalized conduct also differed for older and younger siblings in different dyad gender compositions. The results underscore the need for greater clarity regarding the function that siblings serve in promoting children's moral development during early childhood.