Family studies have demonstrated genetic influences on environmental exposure: the phenomenon of gene-environment correlation (rGE). A few molecular genetic studies have confirmed the results, but the identification of rGE in studies that measure genes and environments faces several challenges. Using examples from studies in psychology and psychiatry, we integrate the behavioral and molecular genetic literatures on rGE, describe challenges in identifying rGE and discuss the implications of molecular genetic findings of rGE for future research on gene-environment interplay and for attempts to prevent disease by reducing environmental risk exposure. Genes affect environments indirectly, via behavior and personality characteristics. Associations between individual genetic variants and behaviors are typically small in magnitude, and downstream effects on environmental risk are further attenuated by behavioral mediation. Genotype-environment associations are most likely to be detected when the environment is behaviorally modifiable and highly specified and a plausible mechanism links gene and behavior. rGEs play an important causal role in psychiatric illness. Although research efforts should concentrate on elucidating the genetic underpinnings of behavior rather than the environment itself, the identification of rGE may suggest targets for environmental intervention even in highly heritable disease. Prevention efforts must address the possibility of confounding between rGE and gene-environment interaction (G x E).