Previously institutionalized children on average show persistent deficits in physiological and behavioral regulation, as well as a lack of normative reticence towards strangers, or disinhibited social engagement (DSE). Post-adoption parenting, specifically a combination of supportive presence and structure/limit-setting, may protect against DSE over time via better adrenocortical functioning. This study examined the impact of adrenocortical activity and post-adoption parenting on DSE across the first two years post-adoption (age at adoption: 16–36 months) and observed kindergarten social outcomes in previously institutionalized children (n = 94) compared to non-adopted children (n = 52). Path analyses indicated a developmental cascade from institutional care (operationalized as a dichotomous group variable, age at adoption, and months of institutionalization) to blunted adrenocortical activity, increased DSE, and lower kindergarten social competence. Consistent with a permissive parenting style, higher parental support was associated with increased DSE, but only when not accompanied by effective structure/limit-setting. Further, parental structure reduced the association between blunted adrenocortical activity and DSE behaviors.