Evidence-based psychosocial interventions for externalizing behavior problems in children born premature have not been reported in the literature. This single-case study describes Parent-Child Interaction Therapy (PCIT) with a 23-month-old child born at 29 weeks gestation weighing 1,020 grams, who presented with significant externalizing behavior problems. Treatment outcome was assessed using standard measures of maternal and child functioning and observational measures of the parent-child interaction, as well as a physiological measure of heart rate variability (i.e., vagal tone) used to assess parasympathetic control in the child. Maternal reports of child behavior problems and their own stress and depressive symptoms decreased after treatment. Behavioral observations demonstrated improved parenting practices and child compliance, and vagal tone showed comparable increases as well. Results suggest that PCIT is a promising psychosocial intervention for children born premature with externalizing behavior problems, and that vagal tone may be a useful measure of treatment outcome.