Objective: The effects of anxiety on adolescents’ psychosocial outcomes are well established, but little consideration has been given to the potential influence of the parent-adolescent relationship in moderating these effects. This study examined the moderating role of parent-adolescent connectedness and hostility in the association between anxiety and adolescent psychosocial functioning (measured by positive development [PD] and oppositional defiant behaviour [ODB]) within a community sample of mothers of adolescents. Method: Participants were 723 Australian mothers (M age = 44.05 years, SD = 5.97) of adolescents aged 11 to 17 years (M = 14.32 years, SD = 5.97; 49% male). Participants completed an online survey comprising measures of parent-adolescent relationships, parenting practices, parental psychological distress, and adolescent anxiety and psychosocial functioning. Results: Consistent with the first hypothesis, results from hierarchical regression analyses revealed that adolescent anxiety, connectedness, and hostility were independent predictors of PD and ODB. Inconsistent with predictions, parent-reported anxiety had a stronger, negative association with PD when mothers viewed the relationship with their adolescents as more connected and less hostile. Neither parent-adolescent connectedness nor hostility moderated the association between maternal reported adolescent anxiety and ODB. Conclusions: Further longitudinal research is needed to understand how the parent-adolescent relationship context might affect outcomes and inform family-based prevention and intervention efforts for at-risk youth with anxiety symptomatology.