The classical twin study provides a useful resource for testing hypotheses about how the family environment influences children's development, including how genes can influence sensitivity to environmental effects. However, existing statistical models do not account for the possibility that children can inherit exposure to family environments (i.e., passive gene-environment correlation). The authors introduce a method to simultaneously estimate the effects of passive gene-environment correlation and gene-environment interaction and use it to investigate the relationship between chaos in the home and verbal ability in a large sample of 4-year-old twins.