Both obesity and exercise behavior are influenced by genetic and environmental factors. However, whether obesity and physical inactivity share the same genetic vs environmental etiology has rarely been studied. We therefore analyzed these complex relationships, and also examined whether physical activity modifies the degree of genetic influence on body mass index (BMI) and waist circumference (WC). The FinnTwin16 Study is a population-based, longitudinal study of five consecutive birth cohorts (1975-1979) of Finnish twins. Data on height, weight, WC and physical activity of 4343 subjects at the average age of 25 (range, 22-27 years) years were obtained by a questionnaire and self-measurement of WC. Quantitative genetic analyses based on linear structural equations were carried out by the Mx statistical package. The modifying effect of physical activity on genetic and environmental influences was analyzed using gene-environment interaction models. The overall heritability estimates were 79% in males and 78% in females for BMI, 56 and 71% for WC and 55 and 54% for physical activity, respectively. There was an inverse relationship between physical activity and WC in males (r = -0.12) and females (r=-0.18), and between physical activity and BMI in females (r = -0.12). Physical activity significantly modified the heritability of BMI and WC, with a high level of physical activity decreasing the additive genetic component in BMI and WC. Physically active subjects were leaner than sedentary ones, and physical activity reduced the influence of genetic factors to develop high BMI and WC. This suggests that the individuals at greatest genetic risk for obesity would benefit the most from physical activity.