BACKGROUND: Considerable evidence from twin and adoption studies indicates that genetic and shared environmental factors play a significant role in the initiation of smoking behavior. Although twin and adoption designs are powerful to detect genetic and environmental influences, they do not provide information on the processes of assortative mating and parent-offspring transmission and their contribution to the variability explained by genetic and/or environmental factors. METHODS: We examined the role of genetic and environmental factors for smoking initiation using an extended kinship design. This design allows the simultaneous testing of additive and non-additive genetic, shared and individual-specific environmental factors, as well as sex differences in the expression of genes and environment in the presence of assortative mating and combined genetic and cultural transmission. A dichotomous lifetime smoking measure was obtained from twins and relatives in the Virginia 30,000 sample. RESULTS: Results demonstrate that both genetic and environmental factors play a significant role in the liability to smoking initiation. Major influences on individual differences appeared to be additive genetic and unique environmental effects, with smaller contributions from assortative mating, shared sibling environment, twin environment, cultural transmission and resulting genotype-environment covariance. The finding of negative cultural transmission without dominance led us to investigate more closely two possible mechanisms for the lower parent-offspring correlations compared to the sibling and DZ twin correlations in subsets of the data: (i) age x gene interaction, and (ii) social homogamy. Neither mechanism provided a significantly better explanation of the data, although age regression was significant. CONCLUSIONS: This study showed significant heritability, partly due to assortment, and significant effects of primarily non-parental shared environment on smoking initiation.