A rich home literacy environment (HLE), which comprises the resources and opportunities in families that support the development of children’s reading skills, is widely considered as an important aspect for the development of reading literacy. PIRLS 2006 revealed a close correlation between the families’ socio-economic status (SES) and the students’ school achievement in all participating countries. Although this correlation is repeatedly found in numerous studies, only little effort is spent on describing the factors causing these disparities. For PIRLS 2006, Stubbe, Buddeberg, Hornberg, & McElvany (2007) developed a Rasch score which allows to quantify the extent of HLE in the students’ families. Following these analyses, this paper deals with the relationship between HLE, SES and reading literacy achievement in the German sample of PIRLS 2006. The main focus is on the contribution of HLE in explaining the differences in reading achievement between students from socially privileged and those from socially underprivileged families. We conduct path analyses in order to examine the relationship between families’ SES and the students’ reading achievement at the end of fourth grade. Additionally we test the hypothesis that the HLE mediates this effect. The results are discussed with respect to their implications for educational practice.