Background: Several studies have shown that substance use levels among adolescents living in residential youth care are high. However, it is not clear to what extent adolescents initiate (heavy) substance during their stay and to what extent these rates are higher than would be expected based on their risk profile. Objective: The aim of the present study is to examine the initiation of (heavy) substance use among adolescents in residential care and to compare these initiation rates with a reference group of non-institutionalized youth, while taking differences in the risk profiles between both groups into account. Methods: Self-report questionnaires were completed by 241 adolescents in residential care (42% boys; mean age 15.4 years) and 359 adolescents attending mainstream education (54% boys; mean age 14.8 years). Results: A substantial proportion of adolescents first started to use substances (heavily) during their stay in residential care (1 year incidence of daily tobacco use: 22.6%, drunkenness: 38.5%, cannabis use: 27.3%, hard drug use: 9.4%. Except for drunkenness, these rates were significantly higher compared to those in mainstream education. Adjusting the analyses for the risk profile showed that the elevated risk for hard drug use remained significant and substantial (IRR = 13.09). Conclusion: A substantial proportion of adolescents started using substances (heavily) during their stay in residential care. Although rates may have been even higher if these adolescents were not placed in residential care, these findings highlight the need for effective preventive interventions and policies in these settings, especially with regard to the use of hard drugs.