Interpretation of ambiguity is consistently associated with anxiety in children, however, the temporal relationship between interpretation and anxiety remains unclear as do the developmental origins of interpretative biases. This study set out to test a model of the development of interpretative biases in a prospective study of 110 children aged 5–9 years of age. Children and their parents were assessed three times, annually, on measures of anxiety and interpretation of ambiguous scenarios (including, for parents, both their own interpretations and their expectations regarding their child). Three models were constructed to assess associations between parent and child anxiety and threat and distress cognitions and expectancies. The three models were all a reasonable fit of the data, and supported conclusions that: (i) children’s threat and distress cognitions were stable over time and were significantly associated with anxiety, (ii) parents’ threat and distress cognitions and expectancies significantly predicted child threat cognitions at some time points, and (iii) parental anxiety significantly predicted parents cognitions, which predicted parental expectancies at some time points. Parental expectancies were also significantly predicted by child cognitions. The findings varied depending on assessment time point and whether threat or distress cognitions were being considered. The findings support the notion that child and parent cognitive processes, in particular parental expectations, may be a useful target in the treatment or prevention of anxiety disorders in children.