Purpose: To test a socialization model of polydrug use among Mexican-American and white non-Hispanic school dropouts. Methods: A sample of 910 Mexican-American and white non-Hispanic school dropouts were surveyed regarding their use of alcohol, marijuana, and other drugs, and socialization characteristics that have previously been shown to be predictive of adolescent substance use. A structural equation model based on peer cluster theory was evaluated for goodness of fit and for differences in model characteristics by ethnicity and gender. Results: Results partially confirmed peer cluster theory among school dropouts in that association with drug-using peers was the most powerful direct predictor of substance use. The effects of a number of other socializing influences were indirect, mediated through association with drug-using peers. Some differences were present between Mexican-American and white non-Hispanic subgroups. Conclusions: Results were similar to those obtained from previous tests of this model among youth who remain in school, suggesting that social influences on drug use are similar across students and school dropouts. Association with drug-using peers dominates the prediction of substance use among school dropouts. However, family communication of drug use sanctions helps to both limit substance use and strengthen family bonds. Prior school adjustment is likely to be an important protective factor in limiting substance use among Mexican-American dropouts.