Research on the development of externalizing behaviors during early childhood has focused on child and parenting factors. Fewer studies have investigated effects of aversive features of the micro-level physical environment, such as overcrowding and chaos in the home, and the macro-level environment, such as neighborhood quality. This study extends research on physical environmental factors by examining their association with children's early externalizing behaviors, and exploring how maternal monitoring may serve as a protective factor in such contexts. 120 male toddlers at high risk for developing early externalizing behaviors were followed from ages 2 to 5 years. Direct longitudinal associations were found for micro-level environmental factors beginning at age 2 and for neighborhood risk beginning at age 3. Maternal monitoring served as a protective factor for child externalizing behaviors in the context of neighborhood risk. Implications for prevention research and the development of early externalizing behaviors are discussed.