Emotion regulation is essential to cognitive, social, and emotional development and difficulties with emotion regulation portend future socioemotional, academic, and behavioral difficulties. There is growing awareness that many developmental outcomes previously thought to begin their development in the postnatal period have their origins in the prenatal period. Thus, there is a need to integrate evidence of prenatal influences within established postnatal factors, such as infant temperament and maternal sensitivity. In the current study, prenatal depression, pregnancy anxiety, and diurnal cortisol patterns (i.e., the cortisol awakening response (CAR) and diurnal slope) were assessed in 254 relatively low-risk mother-infant pairs (primarily White, middle-class) in early (M = 15 weeks) and late pregnancy (M = 33 weeks). Mothers reported on infant temperamental negativity (Infant Behavior Questionnaire–Revised) at 3 months. At 6 months, maternal sensitivity (Parent Child Interaction Teaching Scale) and infant emotion regulation behavior (Laboratory Temperament Assessment Battery) were assessed. Greater pregnancy anxiety in early pregnancy and a blunted CAR in late pregnancy predicted higher infant temperamental negativity at 3 months, and those infants with higher temperamental negativity used fewer attentional regulation strategies and more avoidance (i.e., escape behavior) at 6 months. Furthermore, this indirect effect was moderated by maternal sensitivity whereby infants with elevated negativity demonstrated maladaptive emotion regulation at below average levels of maternal sensitivity. These findings suggest that the development of infant emotion regulation is influenced by the ways that prenatal exposures shape infant temperament and is further modified by postnatal caregiving.