The three peer clusters included close friends, best friend, and boyfriend/girlfriend. The sample contained 165 dropouts and 330 matched comparison subjects from three locations in the southwestern United States. Two comparison groups were used: controls, matched with dropouts on ethnicity, gender, age, and grade; and "at-risk" subjects matched with dropouts as closely as possible on each of the foregoing characteristics in addition to grade-point average at the time of dropout. Use of alcohol, marijuana, and other drugs by the subjects with each of the peer groups and serious delinquent behavior by the members of the peer cluster were the dependent variables for each peer cluster. Significant group effects were found for all three peer clusters. Marijuana was used less by control subjects within all three peer clusters than by at-risk subjects and dropouts. Anglo dropouts reported more marijuana use with their boyfriend/girlfriend than did Mexican-American dropouts. Dropouts in general reported higher rates of delinquency among their peers as well as substance use with their peers than did the other two groups, but these problems should not be used to characterize all dropouts. Many dropouts in the sample neither used drugs with their peers nor had delinquent peers. The study concludes with a discussion of implications of these findings for treatment and prevention. 33 tables, 103 references, and appended study instruments