Summary Children’s vagal tone and vagal suppression were examined as moderators of associations between children’s sleep disruptions and adjustment problems. A relatively large sample (n = 167) of boys and girls who ranged in age between 8 and 9 years participated with their parents. Sleep was examined via actigraphy in the child’s home for seven consecutive days. Children’s vagal tone was examined during baseline conditions, and their vagal suppression was assessed in response to an inter-adult argument. In comparison with children exhibiting higher levels of vagal tone, those with lower vagal tone were at increased risk of externalizing problems, depression symptoms and higher body mass index associated with increased sleep disruptions (i.e. lower Sleep Efficiency, increased Wake Minutes and fewer Sleep Minutes). Thus, lower vagal tone functioned as a vulnerability factor for adjustment problems in the context of sleep problems. A higher level of vagal suppression to the inter-adult argument functioned as a protective factor against externalizing behaviors otherwise associated with increased Wake Minutes and reduced Sleep Efficiency. Findings demonstrating the moderating role of vagal functioning in the context of sleep disruptions are novel, and highlight the importance of individual differences in children’s physiological regulation for sleep and adjustment.