Background: Findings are presented of the second phase of a longitudinal study of families created through surrogacy. Methods: At the time of the child's 2nd birthday, 37 surrogacy families were compared with 48 egg donation families and 68 natural conception families on standardised interview and questionnaire measures of the psychological well-being of the parents, parent-child relationships and the psychological functioning of the child. Results: The surrogacy mothers showed more positive parent-child relationships, and the surrogacy fathers reported lower levels of parenting stress, than their natural conception counterparts. The surrogacy children did not differ from the natural conception children with respect to socio-emotional or cognitive development. Conclusions: Surrogacy does not appear to impact negatively on parenting or child development in families with 2-year-old children.