Maternal insensitivity to children’s emotional distress (e.g., expressions of sadness or fearfulness) is one mechanism through which maternal alcohol dependence may increase children’s risk for psychopathology. Although emotion dysregulation is consistently associated with psychopathology, it remains unclear how or why alcohol dependence’s effects on caregiving responses to children’s distress may impact children’s emotion regulation over time, particularly in ways that may engender risks for psychopathology. This study examined longitudinal associations between lifetime maternal alcohol dependence symptoms, mothers’ insensitivity to children’s emotional distress cues, and children’s emotional reactivity among 201 mother-child dyads (Mchild age = 2.14 years; 56% Black; 11% Latino). Structural equation modeling analyses revealed a significant mediational pathway such that maternal alcohol dependence predicted increases in mothers’ insensitivity to children’s emotional distress across a one-year period (β = .16, p = .013), which subsequently predicted decreases in children’s emotional reactivity one year later (β = −.29, p = .009). Results suggest that mothers with alcohol dependence symptoms may struggle to sensitively respond to children’s emotional distress, which may prompt children to suppress or hide their emotions as an adaptive, protective strategy. The potential developmental benefits and consequences of early, protective expressive suppression strategies are discussed via developmental psychopathology frameworks.