This study focuses on child characteristics and on the qualities of the caregiving environment that differentiated between offspring of alcoholics who did and those who did not develop serious coping problems by age 18. The 49 subjects (22 male) are members of a multiracial cohort of 698 children born in 1955 on the island of Kauai, Hawaii, who were followed at ages 1, 2, 10 and 18. In this group, males and the offspring of alcoholic mothers had higher rates of psychosocial problems in childhood and adolescence than females and the offspring of alcoholic fathers. Children of alcoholics who developed no serious coping problems by age 18 differed from those who did in characteristics of temperament, communication skills, self-concept and locus of control. They had also experienced fewer stressful life events disrupting their family unit in the first two years of life. Results of the study support a transactional model of human development and demonstrate bidirectionality of child-caregiver effects.