Background: Sociometer theory posits that self-esteem is a subjective monitor of the quality of one's interpersonal relationships. When people feel excluded by others, they may have negative relational evaluation about themselves—low self-esteem. In the present study, we hypothesised and tested that feelings of loneliness among children and adolescents affected by parental HIV would decrease their self-esteem over time; moreover, low self-esteem would intensify feelings of loneliness. Methods: We utilised longitudinal data from a sample of children and adolescents affected by parental HIV to estimate the reciprocal effects between self-esteem and loneliness over time. The sample included 195 children and early adolescents affected by parental HIV (age range 7–15, M = 10.62, 82 females) who served as a control group in a large intervention study on psychological well-being. Seven waves of longitudinal panel data were collected from participants in three years. Results: In cross-lagged panel models that tested the reciprocal effects of loneliness and self-esteem, loneliness predicted decreased levels of self-esteem over time; in addition, low self-esteem predicted increased levels of loneliness over time. Conclusions: These findings support sociometer theory and suggest that loneliness is a risk factor for children's and adolescents’ self-esteem. The implications for improving vulnerable children's and adolescents’ psychological well-being are discussed.