We propose a new model of personality development, the disposition–adaptation–environment (DAE) model. It is based on the assumption that two types of individual characteristics can be distinguished: Dispositions make up the relatively stable core of personality at a particular age, and adaptations are the joint outcome of effects of dispositions and environmental characteristics and mediate transactions between dispositions and environments. Whereas distinctions between dispositions and adaptations have been drawn before, the DAE model is unique in that it (i) entails testable hypotheses whether individual characteristics are adaptations or dispositions, (ii) is based on quasi‐causal cross‐lagged effects, (iii) assigns adaptations a functional role as longitudinal mediators of disposition–environment transaction, and (iv) is developmentally sensitive. We illustrate application of the DAE model with a three‐wave longitudinal study of 1118 adolescents who were observed from the first to the third year in middle school, using the Big Five as dispositions, conduct and self‐esteem with peers as adaptations, and peer acceptance and rejection as the environmental measures. Hypotheses‐driven and exploratory analyses were combined to yield both safe conclusions and novel hypotheses. We compare the model with other models of personality development and discuss extensions that include stable genetic and socio‐economic effects. Copyright © 2017 European Association of Personality Psychology