Exposure to stress related to the COVID-19 pandemic contributes to psychopathology risk, yet not all children are negatively impacted. The current study examined a parasympathetic biomarker of stress sensitivity, respiratory sinus arrhythmia (RSA), as a moderator of the effects of exposure to pandemic stress on child internalizing and externalizing behaviors in a sample of children experiencing economic marginalization. Three to five years pre-pandemic, when children were preschool-aged, RSA during baseline and a challenging parent-child interaction were collected. Mid-pandemic, between November 2020 and March 2021, children’s exposure to pandemic stress and internalizing and externalizing behaviors were collected. Results demonstrated that children who, pre-pandemic, demonstrated blunted parasympathetic reactivity (i.e., no change in RSA relative to baseline) during the dyadic challenge exhibited elevated risk for externalizing behaviors mid-pandemic. Further, this risk was greatest for children exposed to high and moderate levels of pandemic stress. Consistent with diathesis stress and polyvagal frameworks, these conditional effects suggest that blunted parasympathetic reactivity in response to stress in early childhood may escalate the development of externalizing behaviors following stress exposure at school age.