Prenatal maternal anxiety is considered a risk factor for the development of child internalizing problems. However, little is known about potential mechanisms that account for these associations. The current study examined whether prenatal maternal anxiety was indirectly associated with toddler internalizing problems via prenatal maternal physiology and infant negative affectivity. We examined these associations in a longitudinal study of 162 expectant mothers from their third trimester until 18 months postpartum. Path analyses showed that higher prenatal anxiety was associated with higher infant negative affectivity at 7 months, which in turn was associated with higher toddler internalizing problems at 18 months. Prenatal anxiety was not indirectly associated with child outcomes via baseline or task-evoked respiratory sinus arrhythmia (RSA) in response to an infant cry while pregnant. However, pregnant women with greater decreases in task-evoked RSA had toddlers with greater internalizing problems, which was mediated by infant negative affectivity at 7 months. Findings suggest that prenatal anxiety and RSA reactivity to an infant cry may be independent risk factors for the development of infant negative affectivity, which in turn increases risk for toddler internalizing problems. These findings contribute to a growing literature on mechanisms that underlie intergenerational transmission of internalizing problems.