Considerable animal research and available human studies suggest that psychological distress experienced by mothers during gestation is associated with later neurodevelopmental deficits in offspring; however, little research has examined potential protective factors that might mitigate this risk. The current study examined the impact of maternal prenatal psychological distress during pregnancy on cognitive outcomes in preschoolers (ages 2.5–5 years) and positive parenting as a potential protective factor. Mother-child dyads (N = 162, mean child age = 44 months, 49 % female) were recruited from a longitudinal cohort of women who had previously participated in a study of maternal mood disorders during pregnancy. Maternal prenatal distress was assessed with multiple measures collected throughout pregnancy. During a follow-up visit, mothers were interviewed about their psychological symptoms since the birth of the child, parenting behaviors were recorded during a parent-child interaction, and children’s cognitive abilities were measured using the Differential Ability Scales, 2nd Edition. Maternal prenatal distress significantly predicted lower general cognitive abilities; however, this relationship was strongest for children whose mothers exhibited low levels of positive engagement and not significant when mothers exhibited high levels of positive engagement. Results suggest that positive parental engagement can protect against the detrimental effects of maternal prenatal distress on preschoolers’ cognitive abilities.