We apply an extended Cox model to study latent genes and measured environmental exposures simultaneously as risk factors for disease. Using this method, we assume Mendelian transmission of the genes and either dominant or recessive gene action. We compared the results from this model with those obtained under a model that includes the environmental variables and a family risk score. We demonstrate the method in samples of 1,433 Caucasian families (N = 6,791) and 206 African-American families (N = 771) from the National Heart, Lung, and Blood Institute Family Heart Study. In Caucasians, we found evidence suggesting that having ever smoked increased the risk of coronary heart disease only in individuals who carry a genetic susceptibility. We also noted that in both Caucasian and African-American families, the relative risk of coronary heart disease for ever-treated vs never-treated for high serum total cholesterol increased after including an unobserved susceptibility genotype in the model. This finding implied that there may be genes influencing coronary heart disease independent of those that influence total cholesterol. Such findings were not evident when genetic risk was summarized by the family history score. We also discuss the extension of the model to address the etiology of complex diseases.