Identifying genetic variations predictive of important phenotypes, such as disease susceptibility, drug efficacy, and adverse events, remains a challenging task. There are individual polymorphisms that can be tested one at a time, but there is the more difficult problem of the identification of combinations of polymorphisms or even more complex interactions of genes with environmental factors. Diseases, drug responses or side effects can result from different mechanisms. Identification of subgroups of people where there is a common mechanism is a problem for diagnosis and prescribing of treatment. Recursive partitioning (RP) is a simple statistical tool for segmenting a population into non-overlapping groups where the response of interest, disease susceptibility, drug efficacy and adverse events are more homogeneous within the segments. We suggest that the use of RP is not only more technically feasible than other search methods but it is less susceptible to multiple-testing problems. The numbers of combinations of gene-gene and gene-environment interactions is potentially astronomical and RP greatly reduces the effective search and inference space. Moreover, the certain reliance of RP on the presence of marginal effects is justifiable as was found by using analytical and numerical arguments. In the context of haplotype analysis, results suggest that the analysis of individual SNPs is likely to be successful even when susceptibilities are determined by haplotypes. Retrospective clinical studies where cases and controls are collected will be a common design. This report provides methods that can be used to adjust the RP analysis to reflect the population incidence of the response of interest. Confidence limits on the incidence of the response in the segmented subgroups are also discussed. RP is a straightforward way to create realistic subgroups, and prediction intervals for the within-subgroup disease incidence are easily obtained.