Respiratory sinus arrhythmia (RSA), a marker of self‐regulation, has been linked to developmental outcomes in young children. Although positive emotions may have the potential to facilitate physiological self‐regulation, and enhanced self‐regulation could underlie the development of positive emotions in early childhood, the relation between positive emotions and physiological self‐regulation in infancy has been relatively overlooked. The current study examined the bidirectional associations among maternal positive emotion, infant positive emotionality, and infant resting RSA across the first 18 months of life. We used data from the Longitudinal Attention and Temperament Study (LanTs; N = 309 in the current analysis) to test the within‐ and between‐person relations of study variables over time using a random‐intercepts cross‐lagged panel model. We found that infants with higher overall levels of positive emotionality also displayed greater resting RSA, and their mothers exhibited higher levels of positive emotion. However, there were negative cross‐lagged associations within‐person; higher than average infant positive emotionality predicted lower levels of infant resting RSA at the subsequent timepoint during early infancy, whereas higher than average infant RSA subsequently predicted decreased levels of infant positive emotionality later in infancy. Results highlight the importance of considering transactional relations between positive emotion and physiological self‐regulation in infancy.