There is increasing evidence that heritable variation in gene expression underlies genetic variation in susceptibility to disease. Therefore, a comprehensive understanding of the similarity between relatives for transcript variation is warranted--in particular, dissection of phenotypic variation into additive and non-additive genetic factors and shared environmental effects. We conducted a gene expression study in blood samples of 862 individuals from 312 nuclear families containing MZ or DZ twin pairs using both pedigree and genotype information. From a pedigree analysis we show that the vast majority of genetic variation across 17,994 probes is additive, although non-additive genetic variation is identified for 960 transcripts. For 180 of the 960 transcripts with non-additive genetic variation, we identify expression quantitative trait loci (eQTL) with dominance effects in a sample of 339 unrelated individuals and replicate 31% of these associations in an independent sample of 139 unrelated individuals. Over-dominance was detected and replicated for a trans association between rs12313805 and ETV6, located 4MB apart on chromosome 12. Surprisingly, only 17 probes exhibit significant levels of common environmental effects, suggesting that environmental and lifestyle factors common to a family do not affect expression variation for most transcripts, at least those measured in blood. Consistent with the genetic architecture of common diseases, gene expression is predominantly additive, but a minority of transcripts display non-additive effects.