Understanding how environmental variation and genotype-environment interactions contribute to phenotypic variation is a central challenge in current biology. While the significance of phenotypic plasticity and genotype-by-environment interactions is widely recognized, we are still lacking an integrated mechanistic and evolutionary understanding of how gene-environment interactions shape development and how they impact evolutionary processes. We address this problem using the nematode Caenorhabditis elegans and related species, focusing on molecularly well-characterized systems, such as germline and vulval cell fate patterning, to study how environmental variation modulates developmental processes and their phenotypic outcomes, including fitness consequences. One principal goal is thus to establish causal connections between reaction norms at molecular-cellular-developmental levels and reaction norms in life history traits.