This study adopts a dyadic perspective to explore how parental partnership quality relates to the wellbeing of children living with both biological parents versus those with a biological parent and a stepparent. We apply multivariable linear regression and a mediation analysis on dyadic data from the German Panel Analysis of Intimate Relationships and Family Dynamics (pairfam) to understand the relationship between family structure, step- and biological parents’ partnership quality, and children’s self-reported wellbeing, operationalised over the Strength and Difficulties Questionnaire (SDQ-scores). We differentiate two separate dimensions of parental partnership quality, namely the frequency of conflict and esteem between the (step-) parents. The results show that children living with a stepparent exhibit higher total difficulties scores as compared to children living with both their biological parents. However, parental conflict occurs less and esteem more frequently in stepfamilies than in nuclear families. Mediation analysis indicates that frequency of esteem between parents partially mediates the impact of family structure on SDQ-scores. Our analysis suggests that the negative effect of living with stepparents on children’s social and behavioural problems is slightly mitigated by increased parental esteem in these unions.