In this article, we consider an often overlooked model that combines mediation and moderation to explain how a third variable can relate to a risk factor–psychopathology relationship. We refer to it as moderation and mediation in a three-variable system. We describe how this model is relevant to studying vulnerability factors and how it may advance developmental psychopathology research. To illustrate the value of this approach, we provide several examples where this model may be applicable, such as the relationships among parental externalizing pathology, harsh parenting, and offspring psychopathology as well as between neuroticism, stressful life events, and depression. We discuss possible reasons why this model has not gained traction and attempt to clarify and dispel those concerns. We provide guidance and recommendations for when to consider this model for a given data set and point toward existing resources for testing this model that have been developed by statisticians and other methodologists. Lastly, we describe important caveats, limitations, and considerations for making this approach most useful for developmental research. Overall, our goal in presenting this information to developmental psychopathology researchers is to encourage testing moderation and mediation in a three-variable system with the aim of advancing analytic strategies for studying vulnerability factors.