Importance: In 2016, an estimated 8% of US children younger than 18 years had experienced the incarceration of a parent, and rates were substantially higher among children from racial and ethnic minority backgrounds and disadvantaged groups. Little is known about whether parental incarceration during childhood is associated with adult psychiatric problems and functional outcomes. Objective: To examine whether parental incarceration is associated with increased levels of psychiatric diagnosis and poor outcomes in health, legal, financial, and social domains in adulthood. Design, Setting, and Participants: This cohort study used data from the community-representative, prospective, longitudinal Great Smoky Mountains Study. Children and their parents were interviewed up to 8 times from January 1993 to December 2000 (ages 9-16 years; 6674 observations of 1420 participants) using the Child and Adolescent Psychiatric Assessment, which assessed parental incarceration, childhood psychiatric diagnoses, and other adversities. Young adults were followed up at ages 19, 21, 25, and 30 years from January 1999 to December 2015 (4556 observations of 1334 participants) to assess psychiatric diagnoses and functional outcomes indicative of a disrupted transition to adulthood. Data analysis was conducted from June 2018 to June 2019. Results: By age 16 years, 475 participants (weighted percentage, 23.9%) had a parental figure who had been incarcerated, including 259 young men (22.2%) and 216 young women (25.5%). Parental incarceration was associated with higher prevalence of childhood psychiatric diagnoses (eg, any depressive diagnosis: adjusted odds ratio [aOR], 2.5; 95% CI, 1.3-4.6; P = .006; attention-deficit/hyperactivity disorder: aOR, 2.3; 95% CI, 1.0-5.5; P = .06; and conduct disorder: aOR, 2.5; 95% CI, 1.4-4.3; P = .001). After accounting for childhood psychiatric diagnoses and adversity exposure, parental incarceration remained associated with increased odds of having an adult anxiety disorder (aOR, 1.7; 95% CI, 1.0-3.0; P = .04), having an illicit drug use disorder (aOR, 6.6; 95% CI, 2.6-17.0; P < .001), having a felony charge (aOR, 3.4; 95% CI, 1.8-6.5; P < .001), incarceration (aOR, 2.8; 95% CI, 1.4-5.4; P = .003), not completing high school (aOR, 4.4; 95% CI, 2.2-8.8; P < .001), early parenthood (aOR, 1.7; 95% CI, 1.0-3.0; P = .04), and being socially isolated (aOR, 2.2; 95% CI, 1.2-4.0; P = .009). Conclusions and Relevance: This study suggests that parental incarceration is associated with a broad range of psychiatric, legal, financial, and social outcomes during young adulthood. Parental incarceration is a common experience that may perpetuate disadvantage from generation to generation.