We examined the relations between mothers' reading skills, home literacy environment (HLE), and children's emergent literacy skills and word reading and whether their relations vary across urban and rural contexts in China. Four hundred third-year kindergarten Chinese children (M[subscript age] = 74.50 ± 3.77 months) were recruited from Jining (N = 232) and the small towns of Luqiao and Mapo (N = 168). The children were assessed on emergent literacy skills (pinyin letter knowledge, phonological awareness, rapid automatized naming [RAN], and vocabulary) and word reading. Their mothers were also assessed on reading skills and completed a questionnaire on HLE (direct teaching, shared book reading, and access to literacy resources [ALR]). Results of structural equation modeling showed that (a) mothers' reading skills correlated with shared book reading and ALR in both groups, (b) direct teaching predicted children's pinyin letter knowledge, and ALR predicted phonological awareness and vocabulary in both groups after controlling for mothers' reading skills and parents' education, and (c) mothers' reading skills had an indirect effect on children's word reading through vocabulary (in the urban group) or phonological awareness (in the rural group). Multigroup analyses further showed that the effect of direct teaching on RAN was stronger in the rural group. These findings suggest that HLE exerts its effect on children's emergent literacy skills and word reading across contexts, even after controlling for mothers' reading skills.