The study sample included 155 women between 17 and 19 years of age who were recruited from 3 Los Angeles high schools and were followed annually for 5 years. Comprehensive diagnostic and psychosocial assessments were performed using standardized instruments. Primary outcome measures included MDD and SUD during follow-up in those with and without a prior history of MDD or SUD and psychosocial functioning associated with SUD. Results showed the 5-year incidence of SUD was 9.6 percent and by the end of follow-up 18.7 percent. Prior SUD significantly increased the risk for SUD diagnosis. Co-occurrence of MDD and SUD was high during adolescent and early adult years, with episodes of both disorders occurring in close temporal proximity. SUD also predicted MDD over time, but the reverse was not true. After controlling for the effects of MDD on social adjustment, SUD was associated with significant impairment in school functioning. Findings suggest that the risk for new onset and recurrence of SUD is high during the developmental transition to adulthood, that SUD during this developmental period is associated with significant school problems, and that SUD and MDD frequently co-occur during the post-high school transition in women. Given the significant psychosocial dysfunction caused by these illnesses, early detection and effective intervention are crucial. 44 references, 2 tables, and 1 figure