Children with severe acute malnutrition (SAM) remain vulnerable after treatment at nutritional rehabilitation units (NRUs). The objective was to assess the concurrent pathways in a hypothesized model between caregiver body mass index (BMI), the home environment, and child nutritional status, and development (gross motor, fine motor, language, and social domains) in children with SAM following discharge from inpatient treatment. Structural equation modelling (SEM) was performed with data from a cluster-randomized controlled trial at the Moyo Nutritional Rehabilitation and Research Unit in Blantyre, Malawi. This approach was undertaken to explore simultaneous relationships between caregiver BMI, the home environment (Home Observation for Measurement of the Environment Inventory scores), child nutritional status (anthropometric indicators including weight-for-age z-scores [WAZ]), and child development (Malawi Developmental Assessment Tool (MDAT) z-scores as a latent variable) in children with SAM. These data were collected at participants' homes six months after discharge from NRU treatment. This analysis included 85 children aged 6-59 months with SAM and their caregivers recruited to the trial at the NRU and followed up successfully six months after discharge. The model with WAZ as the nutritional indicator fit the data according to model fit indices (χ2 = 28.92, p = 0.42). Caregiver BMI was predictive of better home environment scores (β = 0.23, p = 0.03) and child WAZ (β = 0.30, p = 0.005). The home environment scores were positively correlated with MDAT z-scores (β = 0.32, p = 0.001). Child nutritional status based on WAZ was also correlated with MDAT z-scores (β = 0.37, p<0.001). This study demonstrates that caregiver BMI could ultimately relate to child development in children with SAM, through its links to the home environment and child nutritional status.