Background History and severity of atopic dermatitis (AD) are risk factors for peanut allergy. Recent evidence suggests that children can become sensitized to food allergens through an impaired skin barrier. Household peanut consumption, which correlates strongly with peanut protein levels in household dust, is a risk factor for peanut allergy. Objective We sought to assess whether environmental peanut exposure (EPE) is a risk for peanut sensitization and allergy and whether markers of an impaired skin barrier modify this risk. Methods Peanut protein in household dust (in micrograms per gram) was assessed in highly atopic children (age, 3-15 months) recruited to the Consortium of Food Allergy Research Observational Study. History and severity of AD, peanut sensitization, and likely allergy (peanut-specific IgE, ≥5 kUA /mL) were assessed at recruitment into the Consortium of Food Allergy Research study. Results There was an exposure-response relationship between peanut protein levels in household dust and peanut skin prick test (SPT) sensitization and likely allergy. In the final multivariate model an increase in 4 log2 EPE units increased the odds of peanut SPT sensitization (1.71-fold; 95% CI, 1.13- to 2.59-fold; P  = .01) and likely peanut allergy (PA; 2.10-fold; 95% CI, 1.20- to 3.67-fold; P  < .01). The effect of EPE on peanut SPT sensitization was augmented in children with a history of AD (OR, 1.97; 95% CI, 1.26-3.09; P  < .01) and augmented even further in children with a history of severe AD (OR, 2.41; 95% CI, 1.30-4.47; P  < .01); the effect of EPE on PA was also augmented in children with a history of AD (OR, 2.34; 95% CI, 1.31-4.18; P  < .01). Conclusion Exposure to peanut antigen in dust through an impaired skin barrier in atopically inflamed skin is a plausible route for peanut SPT sensitization and PA.