Children diagnosed with environmentally based failure to thrive early during their first year of life were seen at 12 and 18 months for assessment of psychological development (cognition, language, symbolic play, and behavior during testing). Based on a transactional model of outcome, factors reflecting biological vulnerability (wasting and stunting) and family ecology (income level, family size, and ratio of adults to children) were correlated with outcome measures. Predictions that outcome would reflect biological vulnerability and family ecology were upheld for Bayley Mental Development Index and Symbolic Play scores at 18 months but not at different ages or for other measures. Children who were less malnourished at study intake and who were from families with higher incomes had higher levels of cognitive development. Children who were less malnourished and from families with higher incomes and a higher ratio of adults to children had higher Symbolic Play scores. Findings underscored the utility of a transactional model in predicting psychological outcome for childhood disorders such as failure to thrive. It was suggested that models of research and clinical intervention in failure to thrive should consider the conjoint influences of the child's nutritional status and family ecology, especially the impact of resources and their allocation on psychological outcome. (Author/RH)