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Exposure to higher levels of sociodemographic risk is associated with lower levels of academic achievement among young children. However, there is variability in the strength of this association, which may be traced to individual differences in physiological processes underlying self‐regulation. In the current study, we examined whether the response of the parasympathetic nervous system to challenge, indexed by change in respiratory sinus arrhythmia (RSA), moderated the association between risk and school readiness at 5 years of age in a diverse sample of young children. We found that parasympathetic response to the Still‐Face Paradigm moderated the effects of risk on a measure of school readiness, such that there was no association between risk and school readiness among children who exhibited RSA decreases during challenge at 6 months of age, a purported index of self‐regulation at this age. For those infants who did not exhibit RSA withdrawal during this challenge, exposure to early cumulative risk was associated with lower scores on achievement assessment. These results speak to the possibility that certain patterns of parasympathetic response can serve as a protective factor for young children growing up in disadvantaged environments.