The current study examined the settings in which adolescents use alcohol and drugs, emphasizing sex and peer group differences in where substance use occurs, settings associated with more problematic substance use, and settings potentially serving as sites of initiation of adolescent substance use. Subjects were 449 juniors and seniors attending two Midwestern high schools (51% male; aged 16–19) who completed in-class surveys. Few sex differences in settings of substance use were found, although girls were more likely than boys to drink in family settings. More severe substance use was associated with a higher likelihood of drinking at school. Moreover, alcohol users were more likely to report drinking in their own homes and at their friends' homes than abstainers were to indicate selecting these settings to use alcohol if they were to do so. Drug users were more likely to report substance use outdoors, at their friends' homes, at social parties, and at school than were abstainers to indicate selecting these settings to use drugs if they were to do so. Implications of these findings for understanding the epidemiology of substance use and high-risk settings for the initiation and escalation of substance using behaviors are discussed.