This longitudinal study investigated the bidirectional relationship between negative life events and self‐esteem during the transition from adolescence to young adulthood (N = 2272). Drawing on theories of human development over the lifespan and just‐world theory, we analyzed age‐graded changes in self‐esteem and their interplay with negative life events at three measurement points over a 12‐year period. We addressed both the short‐term and the longer term effects of single as well as multiple negative life events on changes in self‐esteem (socialization effects). We further investigated whether the pre‐event level of self‐esteem affected the likelihood of negative life events occurring (selection effects) and, finally, whether it had protective effects in terms of helping people adjust to negative events. Latent change models yielded four main findings: (i) self‐esteem increased during young adulthood; (ii) socialization effects were observed over shorter and longer timespans, but (iii) selection effects were only found for multiple negative life events, with low self‐esteem predicting a high number of negative life events; (iv) high pre‐event self‐esteem acted as a protective factor, attenuating declines in self‐esteem after experience of multiple negative life events. Copyright © 2016 European Association of Personality Psychology