Accounting for gene-environment (G3E) interactions in complex trait association studies can facilitate our understanding of genetic heterogeneity under different environmental exposures, improve the ability to discover susceptible genes that exhibit little marginal effect, provide insight into the biological mechanisms of complex diseases, help to identify high-risk subgroups in the population, and uncover hidden heritability. However, significant G3E interactions can be difficult to find. The sample sizes required for sufficient power to detect association are much larger than those needed for genetic main effects, and interactions are sensitive to misspecification of the main-effects model. These issues are exacerbated when working with binary phenotypes and rare variants, which bear less information on association. In this work, we present a similarity-based regression method for evaluating G3E interactions for rare variants with binary traits. The proposed model aggregates the genetic and G3E information across markers, using genetic similarity, thus increasing the ability to detect G3E signals. The model has a random effects interpretation, which leads to robustness against maineffect misspecifications when evaluating G3E interactions. We construct score tests to examine G3E interactions and a computationally efficient EM algorithm to estimate the nuisance variance components. Using simulations and data applications, we show that the proposed method is a flexible and powerful tool to study the G3E effect in common or rare variant studies with binary traits.KEYWORDS binary traits; gene-environment interaction; rare variant association; GLMM; marker-set interaction analysis; variance-component methods H UMAN complex traits have a multifactor etiology that involves the interplay between genetic susceptibility and environmental exposures. Studies of gene-environment (G3E) interactions can facilitate our understanding of genetic heterogeneity under different environmental exposures (Kraft et al. 2007;Van Os and Rutten 2009), help to identify high-risk subgroups in the population (Murcray et al. 2009), provide insight into the biological mechanisms of complex diseases (Thomas 2010), and improve the ability to discover susceptible genes that interact with other factors but exhibit little marginal effect (Thomas 2010). However, finding significant G3E interactions is not an easy task. Model misspecification, inconsistent definitions of the environmental variable, and insufficient sample sizes are just a few of the issues that often lead to low power and nonreproducible findings in G3E studies (Mechanic et al. 2012;Jiao et al. 2013;Winham and Biernacka 2013). In particular, the sample size needed to detect a G3E effect is usually four times larger than that needed to detect a main effect of similar magnitude (Thomas 2011). Thus, researchers need a robust, powerful G3E test to generate reproducible findings.Conventionally, researchers search for significant genetic or G3E associations, using single-SNP metho...