Child development is a product of the combination of the experience provided by family/social context and their own. Both child and environmental factors are integral when understanding a child's outcomes. The current study mainly investigated the characteristics of the home literacy environment (HLE) and the relationship between the HLE and emergent literacy skills with young Chinese children's development. Sixty-seven Mandarin-speaking children were followed from the second year of kindergarten (K2; mean age = 55.87 months) to the third year of kindergarten (K3; mean age = 67.32 months). Chinese word reading, print awareness and vocabulary were measured and parents were required to report on family's socioeconomic status and children's HLE. The results showed that some aspects of the HLE were stable (e.g., the number of books at home and the frequency of shared book reading), while other aspects significantly differed across the two time points (e.g., the onset of character teaching and the richness of language or reading-related activities at home). Furthermore, parent reading instruction was positively related to Chinese word reading and shared book reading was significantly associated with print awareness. Notably, Chinese word reading at K2 was found to be uniquely predictive of parent reading instruction at K3. Overall, our study provides new empirical evidence for the benefits of nurturing a rich HLE in promoting emergent literacy skills in young Chinese children, as well as the role of children's early word reading skills in constructing their HLE.