SummaryWe examined indices of children's parasympathetic nervous system activity (PNS), including respiratory sinus arrhythmia during baseline (RSAB) and RSA reactivity (RSAR), to a laboratory challenge, and importantly the interaction between RSAB and RSAR as predictors of multiple parameters of children's sleep. Lower RSAR denotes increased vagal withdrawal (reductions in RSA between baseline and task) and higher RSAR represents decreased vagal withdrawal or augmentation (increases in RSA between baseline and task). A community sample of school‐attending children (121 boys and 103 girls) participated [mean age = 10.41 years; standard deviation (SD) = 0.67]. Children's sleep parameters were examined through actigraphy for 7 consecutive nights. Findings demonstrate that RSAB and RSAR interact to predict multiple sleep quality parameters (activity, minutes awake after sleep onset and long wake episodes). The overall pattern of effects illustrates that children who exhibit more disrupted sleep (increased activity, more minutes awake after sleep onset and more frequent long wake episodes) are those with lower RSAB in conjunction with lower RSAR. This combination of low RSAB and low RSAR probably reflects increased autonomic nervous system arousal, which interferes with sleep. Results illustrate the importance of individual differences in physiological regulation indexed by interactions between PNS baseline activity and PNS reactivity for a better understanding of children's sleep quality.