We tested whether individual differences in a component of early conscience mediated relations between parental discipline and externalizing behavior problems in 238 3.5-year-olds. Parents contributed assessments of discipline practices and child moral regulation. Observations of children’s behavioral restraint supplemented parental reports. Parents and teachers reported on child externalizing symptoms. Parental induction, warm responsiveness, and less frequent use of physical punishment generally were associated with higher levels of moral regulation and fewer externalizing problems. Moreover, moral regulation partially mediated relationships between discipline and externalizing symptoms, with the clearest case of mediation involving induction. However, relationships were found for boys only. Results support a mediation model wherein inductive and physical discipline may influence the expression of boys’ externalizing behavior through effects on conscience. Finally, results suggest that different developmental processes may be associated with early externalizing problems in boys and girls, and confirm that fathers’ reports contribute to our understanding of the origins of child externalizing problems.