Research on the home literacy environment has predominantly centered on the quantity of word exposure rather than examining the role that nuanced parent-child interactions play in the home literacy environment and children's language and literacy development. The present study addressed this gap by using the Early Childhood Longitudinal Study-Birth Cohort to examine whether the parent (e.g., sensitivity, positive regard) and child behaviors (e.g., engagement, sustained attention) during parent-child interactions assessed with the two bags task would function as mediators for the association between shared literacy activities and emergent literacy skills and oral language skills. The sample included approximately 10,690 children and their mothers. Results of the longitudinal path analysis with mediators showed the direct effects of shared literacy activities on emergent literacy and oral language outcomes. Additionally, parents' positive regard, children's engagement, and children's sustained attention mediated the association between shared literacy activities and emergent literacy skills and oral language skills at preschool. Implications and future research are discussed.