We examined the nature and implications of family differentiation among adolescents facing a life transition in two European countries with differing family cultures. 124 Italian and 109 UK adolescents completed measures of familiy differentiation (cohesion and enmeshment), identity threat (perception of threat to the self associated with finishing school), life satisfaction, depressive symptoms, and anxiety. Confirmatory factor analyses showed that cohesion and enmeshment were distinguishable in both countries, orthogonal in the UK but positively correlated in Italy. Family cohesion was associated with better psychological well-being in both countries; enmeshment was associated with poorer psychological well-being in the UK but not in Italy. Structural equation models showed that effects on well-being were fully mediated by identity threat in both cultures.