Both environmental tobacco smoke and indoor allergens can exacerbate already established childhood albeit primarily through quite disparate mechanisms. In infancy and childhood, environmental tobacco smoke (ETS) exposure is associated with measures of decreased flow in the airways, bronchial hyperresponsiveness, and increased respiratory infections, but the relationship between ETS and allergy is poorly understood. Indoor allergens from dust mite, cockroach, and cat can be associated with asthma exacerbation in children sensitized to the specific allergens. The precise role of either ETS or indoor allergens in the development of asthma is less well understood. The strong and consistent association between ETS and asthma development in young children may relate to both prenatal and postnatal influences on airway caliber or bronchial responsiveness. Dust mite allergen levels predict asthma in children sensitized to dust mite. The tendency to develop specific IgE antibodies to allergens (sensitization) is associated with and may be preceded by the development of a T-helper (Th)2 profile of cytokine release. The importance of either ETS or indoor allergens in the differentiation of T cells into a Th2-type profile of cytokine release or in the localization of immediate-type allergic responses to the lung is unknown. This article evaluates the strength of the evidence that ETS or indoor allergens influence asthma exacerbation and asthma development in children. We also selectively review data for the effectiveness of allergen reduction in reducing asthma symptoms and present a potential research agenda regarding these two broad areas of environmental exposure and their relationship to childhood asthma.