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Many researchers in the field of education and psychology have been aware of the tremendous impact of the environment as a complex system on human development. By providing and creating the most favorable environment for children, active and wholesome social development is promoted. Three principle areas of concern in creating a quality early childhood education environment are: (1) the environment's effect on the social development of children; (2) the creation and provision of the physical setting; and (3) the provision of a psychological environment. The physical setting includes a pleasant safe and hygienic environment, arrangement of activity space, and material provision for activities. The psychological environment, denoted as the interpersonal relationships and general psychological atmosphere of a preschool, is the most important aspect in a preschool situation. Key components are: interaction between teacher and children, establishment of a caring and loving atmosphere among peers, and teacher-to-teacher interaction. As important as the preschool environment is to social development of children, a family's socioeconomic status, member make-up, mode of interaction and methods of education also weigh heavily in a child's social development. Preschool teachers must be aware of the family environment and use it to promote wholesome social development in children. (LBT)