Using observation and analysis of children's interactions with their environments, this study evaluated the quality of parent-run day care centers. Observation reduces the degree of subjectivism, respects the integrity of the child-care situation, and allows one to witness the actual effects of the environment and to observe the combined effect of multiple factors. The study focused on proximal environment defined in terms of interactions with the environment that facilitated children's discovery and understanding of their world. Environment was defined as the entire situational context in which children develop. Observations took place at four parent-run schools between January and June 1994. Observations were made from videotapes; over 44 hours of data were analyzed. Results of analyses included the following: (1) the degree of parental participation affected the degree of complexity of children's interactions with their environment; (2) children benefitted more or less from complicated interactions depending on whether they came from socioeconomically advantaged or disadvantaged backgrounds; and (3) adults' levels of interactions varied with children's age. (Contains 27 references.) (JW)