Previous research has shown that children with physical conditions involving the brain are at increased risk for psychopathology. It is unclear whether brain dysfunction leads to disturbance directly or whether it does so by increasing the children's vulnerability to environmental stress. I examined the vulnerability hypothesis in a sample of 157 children with cerebral palsy, myelodysplasia, or multiple handicaps and in 339 randomly selected controls. Data on psychopathology came from direct interviews with the children; data on the family environment came from mothers' reports. Physical disabilities were associated with significant increases in depressive symptoms and inattention. Family environment had a significant main effect on depressive symptoms; effect on disabled children was not significantly different from effect on controls. Family environment had no significant effects on symptoms of inattention in disabled children. The findings provided no support for the hypothesis that brain dysfunction renders children vulnerable to environmental stress.