The effect of the teaching and learning environment on the development of generic capabilities was examined through a survey of 1756 undergraduate students at a university in Hong Kong. The survey assessed students' perceptions of the development of the six capabilities of critical thinking, self-managed learning, adaptability, problem solving, communication skills, and interpersonal skills and groupwork. Students were also asked to rate the quality of nine facets of the teaching and learning environment. Structural equation modelling was used to test a model of the influence of teaching on the nurturing of the six capabilities. The model grouped the nine facets of teaching and learning under the three higher-order latent variables of teaching, teacher-student relationship, and student-student relationship. The model showed a good fit to the data, indicating that the teaching and learning environment had a significant impact on the development of the generic capabilities while the students were taking their degree. The teaching latent variable had the strongest effect on the development of all six of the capabilities. A suitable teaching environment was characterised by a focus on understanding, the active participation of students in learning activities, a coherent curriculum, and assessment which focused on analytical skills and self-learning capability. Strong student-student relationships nurtured communication and interpersonal skills. There was a mutually reinforcing effect between the type of teaching, teacher-student relationships and student-student relationships.