Proficient reading requires critical phonological processing skill that interact with both genetic and environmental factors. However, the precise nature of the relationships between phonological processing and genetic and environmental factors are poorly understood. We analyzed data from the Genes, Reading and Dyslexia (GRaD) Study on 1,419 children ages 8 to 14 years from African-American and Hispanic-American family backgrounds living in North America. The analyses showed that phonological awareness mediated the relationship betweenDCDC2-READ1 and reading outcomes when parental education and socioeconomic status was low. The association between READ1 and reading performance is complex, whereby mediation by phonological awareness was significantly moderated by both parental education and socioeconomic status. These results show the importance of home environment and phonological skills when determining associations between READ1 and reading outcomes. This will be an important consideration in the development of genetic screening for risk of reading disability.