This report examines the influence of peer substance use on school performance among 7th grade students in Washington State. The study consisted of two components. The first examined the relationship between substance use and school performance and explored the factors that affect school performance. The second examined the ways variables such as school, community, and peers related to each other and to harmful substance use. The analysis was based on results from the Washington State Survey of Adolescent Health Behavior conducted in 1998. The findings showed a strong relationship between peer group substance use and individual Washington State math and reading standards test scores, when factors such as gender and race were controlled. The difference between no or low drug and alcohol use in a student's peer group in middle school was associated with loss of points on the reading and math tests. The most important identified predictor of peer harmful substance use was a scale factor known as early antisocial behavior. Effective prevention programs aimed at facilitating prosocial school culture may help decrease deviant behavior, thus contributing to a decrease in substance use and an increase in academic achievement. (Contains 3 appendixes, 6 tables, 8 figures, and 30 references.) (JDM)