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It is assumed that additionally to the family background and child characteris-tics, the children’s learning environments are crucial for the acquisition of early competencies. This study aimed to compare the eff ects of home and institutional learning environment on young children’s vocabulary and to test necessary con-ditions for a potential compensatory eff ect of the institutional learning environ-ment. Using longitudinal data from N = 557 preschool children (German National Educational Panel Study), we analysed to what extent family background and children’s characteristics predicted home and institutional learning environments and to what extent these learning environments predicted vocabulary in pre-school and primary school. In order to test if both learning environments pre-dict vocabulary separately, we used almost identical indicators to operationalize them. The effects were estimated within a structural equation model. The study revealed that both, home and institutional learning environment, had small and separate eff ects on children’s vocabulary. The home learning environment was more closely related to the family background, while the institutional learning en-vironment was more closely related to the children’s characteristics. This evokes new possibilities to discuss compensatory effect.