Temperamentally fearful children are at increased risk for the development of anxiety problems relative to less-fearful children. This risk is even greater when early environments include high levels of harsh parenting behaviors. However, the mechanisms by which harsh parenting may impact fearful children's risk for anxiety problems are largely unknown. Recent neuroscience work has suggested that punishment is associated with exaggerated error-related negativity (ERN), an event-related potential linked to performance monitoring, even after the threat of punishment is removed. In the current study, we examined the possibility that harsh parenting interacts with fearfulness, impacting anxiety risk via neural processes of performance monitoring. We found that greater fearfulness and harsher parenting at 2 years of age predicted greater fearfulness and greater ERN amplitudes at age 4. Supporting the role of cognitive processes in this association, greater fearfulness and harsher parenting also predicted less efficient neural processing during preschool. This study provides initial evidence that performance monitoring may be a candidate process by which early parenting interacts with fearfulness to predict risk for anxiety problems.