Recent research on communities and crime and on youth groups in urban settings demonstrates the continued importance of local communities and conditions in determining the behavior of young people. The number of street gangs in many communities has significantly increased, and gang members have become more sophisticated criminals in response to their disillusionment with mainstream social, economic, and political goals. Drug abuse and drug trafficking by gangs have become more widespread and have contributed to the devastation of community life. The result has been the emergence of an "urban underclass" primarily involving African Americans. The notion of functional communities has been proposed to explain the impact of social structure on the disadvantaged. Functional communities provide opportunities for but do not guarantee the development of human and social capital. Community-based police research and innovation are needed to facilitate functional communities and to deter individuals from crime careers. Chicago's Beethoven Project is cited as an example of how problems in highly disorganized communities can be ameliorated by focusing on young families and children. Cultural, economic, and social factors that have contributed to the increased number of gangs in the United States are examined, particularly in the context of the urban underclass thesis. 2 notes