Pathways by which maternal physiological arousal (skin conductance level [SCL]) and regulation (respiratory sinus arrhythmia [RSA] withdrawal) while parenting are linked with concurrent and subsequent maternal sensitivity were examined. Mothers’ (N = 259) SCL and RSA were measured during a resting baseline and while interacting with their 6-month-old infants during tasks designed to elicit infant distress. Then, mothers were interviewed about their emotional and cognitive responses to infant cues (i.e., cry processing) while caregiving using a video recall procedure. Maternal sensitivity was observed during the distressing tasks at 6 months and again when children were 1-year-old. Mothers who were well-regulated (higher RSA suppression from baseline to parenting tasks) engaged in less negative and self-focused cry processing while interacting with their infants, which in turn predicted higher maternal sensitivity at both time points. In addition, SCL arousal and RSA regulation interacted such that maternal arousal was associated with more empathic/infant focused cry processing among mothers who were simultaneously well-regulated, which in turn predicted maternal sensitivity, albeit only at 6 months. These effects were independent of a number of covariates demonstrating the unique role of mothers’ physiological regulation while caregiving on sensitivity. Implications for intervention are discussed.