A parent-offspring adoption path model, which includes a measured index of the home environment, was formulated to assess the extent to which relationships between the environmental index and children's behavior are mediated by genetic and environmental influences of the parents. In addition to the direct effect of the home environment on children's behavior, three types of indirect effects mediated by parental phenotype are considered: a pure environmental effect, a pure genetic effect, and a combined environmental-genetic effect. To illustrate its application, the model was fitted to parental and offspring IQ data collected in the Colorado Adoption Project and an environmental index based on Caldwell and Bradley's (1978) Home Observation for Measurement of the Environment (HOME). Four sets of data, including the HOME index and offspring IQ measured longitudinally at 1, 2, 3, and 4 years of age, were analyzed. The results suggest that in infancy (ages 1 and 2), the HOME reveals a direct environmental effect on children's IQ as well as indirect effects mediated via parental IQ. Surprisingly, during early childhood (ages 3 and 4), the relationship between the HOME and children's IQ is due only to indirect parental mediation. Moreover, other than at year 1, the mediation is purely genetic.