Using Internal Revenue Service Form 990 information for all filing 501(c)(3) organizations from 1998 to 2003, this article explores the organizational and environmental factors that affect nonprofit financial health in two subsectors—human services and higher education. The results yield three noteworthy findings. First, theory and empirical data converge when four commonly used financial indicators are combined to form a single financial health construct. Second, accounting measures and revenue variables are not as clearly related to financial health as the literature suggests. Third, environmental variables including macroeconomic factors (gross domestic product and state product), community factors (median household income), as well as a nonprofit’s financial prominence in their policy area (revenue share) are strong predictors of nonprofit financial health. This research contributes to the literature in several ways, most notably by incorporating a more open-systems approach to the study of nonprofit financial health with the inclusion of several environmental variables.