Great progress has been made in genetic dissection of quantitative trait variation during the past two decades, but many studies still reveal only a small fraction of quantitative trait loci (QTLs), and epistasis remains elusive. We integrate contemporary knowledge of signal transduction pathways with principles of quantitative and population genetics to characterize genetic networks underlying complex traits, using a model founded upon one-way functional dependency of downstream genes on upstream regulators (the principle of hierarchy) and mutual functional dependency among related genes (functional genetic units, FGU). Both simulated and real data suggest that complementary epistasis contributes greatly to quantitative trait variation, and obscures the phenotypic effects of many 'downstream' loci in pathways. The mathematical relationships between the main effects and epistatic effects of genes acting at different levels of signaling pathways were established using the quantitative and population genetic parameters. Both loss of function and "co-adapted" gene complexes formed by multiple alleles with differentiated functions (effects) are predicted to be frequent types of allelic diversity at loci that contribute to the genetic variation of complex traits in populations. Downstream FGUs appear to be more vulnerable to loss of function than their upstream regulators, but this vulnerability is apparently compensated by different FGUs of similar functions. Other predictions from the model may account for puzzling results regarding responses to selection, genotype by environment interaction, and the genetic basis of heterosis.