Differentiation of self (DoS) is the self-regulatory capacity to balance intimacy and autonomy in relationships. Accumulating evidence suggests that DoS is fundamental to achieving a satisfying and fulfilling life. The ability may be even more relevant to lesbian, gay, and bisexual (LGB) individuals who are often in a continual struggle between disclosing their sexual identity and gaining social acceptance. However, less is known about whether and how DoS influences their experiences of proximal minority stress and life satisfaction. The present study proposed a dual-process model to explain the association between DoS and life satisfaction among sexual minorities. A total of 219 sexual minority individuals participated in the study and completed a self-report questionnaire on DoS, proximal minority stress, self-esteem, loneliness, and satisfaction in life. The results revealed the intrapersonal and interpersonal processes underlying DoS and life satisfaction, such that the association between DoS and life satisfaction was mediated by self-esteem and loneliness, respectively. Moreover, the results identified a minority stress-specific pathway through which DoS was linked to life satisfaction through reduced levels of proximal minority stress and loneliness. The findings provide empirical evidence for the role of DoS as a crucial factor in shaping how sexual minority individuals negotiate their boundaries and relationships with other people, which may affect their life satisfaction. Implications on social–emotional learning and LGB-affirmative psychological interventions for fostering DoS among sexual minority individuals were discussed. Copyright © 2022 Global Alliance for Behavioral Health and Social Justice.