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Abstract Adolescence is often associated with an increase in psychopathology. Although previous studies have examined how family environments and neural reward sensitivity separately play a role in youth’s emotional development, it remains unknown how they interact with each other in predicting youth’s internalizing symptoms. Therefore, the current research took a biopsychosocial approach to examine this question using two-wave longitudinal data of 9353 preadolescents (mean age = 9.93 years at T1; 51% boys) from the Adolescent Brain Cognitive Development study. Using mixed-effects models, results showed that higher family conflict predicted youth’s increased internalizing symptoms 1 year later, whereas greater ventral striatum (VS) activity during reward receipt predicted reduced internalizing symptoms over time. Importantly, there was an interaction effect between family conflict and VS activity. For youth who showed greater VS activation during reward receipt, high family conflict was more likely to predict increased internalizing symptoms. In contrast, youth with low VS activation during reward receipt showed high levels of internalizing symptoms regardless of family conflict. The findings suggest that youth’s neural reward sensitivity is a marker of susceptibility to adverse family environments and highlight the importance of cultivating supportive family environments where youth experience less general conflict within the family.