Background <p>Children of parents with mental illness (COPMI) experience a range of emotional behavioral problems throughout their development, mainly due to family and environmental factors. Therefore, the current study investigated the role of parental acceptance/rejection and chaotic home environment in developing externalizing and internalizing behavioral problems among Pakistani children and adolescents affected by parental mental illness.</p> Methods <p>The study followed a cross-sectional research design. A purposive sample of 300 children and adolescents (51.3% girls; <i>M</i>_<i>age</i> =14.31; <i>SD</i>_<i>age</i> = 2.23), whose parents were diagnosed with mental illness (mainly major depressive disorder, 53.3%) at psychiatric care units of the public sector hospitals of Punjab, Pakistan, collected during May 2024 to December 2024. After providing consent, the participants completed the Parental Acceptance-Rejection Questionnaire, Confusion Hubbub and Order Scale, and Strengths and Difficulties Questionnaire, along with a demographic information sheet. We also obtained a sample of 300 children and adolescents whose parents had no reported mental illness from public and private sector schools in Punjab for the sake of comparison. Data were collected from March 2024 to June 2024.</p> Results <p>Results of multiple regression analysis demonstrated that the children and adolescents of parents with mental illness who are exposed to higher levels of parental rejection (neglect, rejection &amp; hostility) and chaotic home environments exhibit increased behavioral problems, particularly those with externalizing tendencies (conduct &amp; hyperactivity). A significant interaction effect using two-way ANOVA across groups with and without parental mental illness (PMI) and gender reflected differences in externalizing and internalizing problems. Among children in the PMI group, boys exhibited higher levels of externalizing behavioral problems than girls, indicating that exposure to parental mental illness may have a stronger impact on boys’ outward behavioral difficulties. In contrast, within the without-PMI group, girls showed higher level of externalizing problems than boys. A similar trend was observed for internalizing behavioral problems. Boys in the PMI group displayed more internalizing symptoms than girls, whereas in the without-PMI group, girls reported higher internalizing problems than boys. This consistent pattern across both domains indicates that the presence or absence of parental mental illness may influence boys and girls differently in terms of emotional and behavioral adjustment.</p> Conclusions <p>These results emphasize the dire need for targeted interventions aimed at promoting emotional and behavioral stability in children and adolescents affected by PMI through family-focused support programs that address the demands of the parent-child relationship and the domestic environment in the context of parental mental illness.</p> Clinical trial number <p>Not applicable.</p>