Any genome-wide analysis is hampered by reduced statistical power due to multiple comparisons. This is particularly true for interaction analyses, which have lower statistical power than analyses of associations. To assess gene-environment interactions in population settings we have recently proposed a statistical method based on a modified two-step approach, where first genetic loci are selected by their associations with disease and environment, respectively, and subsequently tested for interactions. We have simulated various data sets resembling real world scenarios and compared single-step and two-step approaches with respect to true positive rate (TPR) in 486 scenarios and (study-wide) false positive rate (FPR) in 252 scenarios. Our simulations confirmed that in all two-step methods the two steps are not correlated. In terms of TPR, two-step approaches combining information on gene-disease association and gene-environment association in the first step were superior to all other methods, while preserving a low FPR in over 250 million simulations under the null hypothesis. Our weighted modification yielded the highest power across various degrees of gene-environment association in the controls. An optimal threshold for step 1 depended on the interacting allele frequency and the disease prevalence. In all scenarios, the least powerful method was to proceed directly to an unbiased full interaction model, applying conventional genome-wide significance thresholds. This simulation study confirms the practical advantage of two-step approaches to interaction testing over more conventional one-step designs, at least in the context of dichotomous disease outcomes and other parameters that might apply in real-world settings.