The present study investigated the intergenerational transmission of problem gambling and the potential mediating role of parental psychopathology (problem drinking, drug use problems, and mental health issues). The study comprised 3953 participants (1938 males, 2015 females) recruited from a large-scale Australian community telephone survey of adults retrospectively reporting on parental problem gambling and psychopathology during their childhood. Overall, 4.0% [95%CI 3.0, 5.0] (n = 157) of participants reported paternal problem gambling and 1.7% [95%CI 1.0, 2.0] (n = 68) reported maternal problem gambling. Compared to their peers, participants reporting paternal problem gambling were 5.1 times more likely to be moderate risk gamblers and 10.7 times more likely to be problem gamblers. Participants reporting maternal problem gambling were 1.7 times more likely to be moderate risk gamblers and 10.6 times more likely to be problem gamblers. The results revealed that the relationships between paternal-and-participant and maternal-and-participant problem gambling were significant, but that only the relationship between paternal-and-participant problem gambling remained statistically significant after controlling for maternal problem gambling and sociodemographic factors. Paternal problem drinking and maternal drug use problems partially mediated the relationship between paternal-and-participant problem gambling, and fully mediated the relationship between maternal-and-participant problem gambling. In contrast, parental mental health issues failed to significantly mediate the transmission of gambling problems by either parent. When parental problem gambling was the mediator, there was full mediation of the effect between parental psychopathology and offspring problem gambling for fathers but not mothers. Overall, the study highlights the vulnerability of children from problem gambling households and suggests that it would be of value to target prevention and intervention efforts towards this cohort.