The construct of family differentiation describes patterns of distance regulation within families. These patterns reflect the relative degree of individuality and intimacy that characterize a family system. Family differentiation levels are linked to a variety of adolescent adjustment variables. Despite being conceptualized theoretically as a bidimensional construct, family differentiation has typically been presented in past research as a unidimensional variable. This study employed the multiple perspectives of mothers, fathers, and adolescents to examine the fit of unidimensional versus bidimensional structure of this family system construct as well as to evaluate its predictive relationship with an adolescent internalized distress latent construct derived from indicators related to anxiety, worry, and depression. Findings supported the bidimensionality of family differentiation and the significant predictive influence of one of the two dimensions (i.e., tolerance for individuality) on the internalized distress of adolescents. These findings and issues related to future research are discussed.