We investigated the independent contributions of a candidate gene and an environmental factor, and the presence of gene x environment (G x E) interaction, in the etiology of a disease in the Genetic Analysis Workshop (GAW) 12 problem 2 simulated data using a two-stage approach utilizing both case-control and case-parent study designs. Using the case-control design, several SNPs within candidate gene 1 (CG1) and environmental factor 1 (dichotomized using the 75th percentile as a cut-off) (EXP) were independently associated with disease status, in models adjusted for age and sex. We found evidence of gene x environment (G x E) interaction between EXP and two single-nucleotide polymorphisms (SNPs) within CG1 using the case-control design. Using the case-parent study design in the same population, we detected association between SNPs within CG1 and disease, but no G x E interaction was detected.