Social development theories highlight the centrality of peer groups during adolescence and their role in socializing attitudes and behaviors. In this longitudinal study, we tested the effects of group-level prejudice on ensuing positive and negative interpersonal interactions among peers over a 7-month period. We used social network analysis to identify peer groups based on sociometric nominations, followed by multilevel modeling of the effects of sexual prejudice at the group level on interpersonal interactions among individuals in these groups. As hypothesized, the interpersonal interactions in peer groups with stronger group-level sexual prejudice were distinct from and poorer than those in groups with weaker group-level sexual prejudice. Moreover, longitudinal models indicated that adolescents in groups with stronger initial sexual prejudice reported worse interpersonal interactions with their peers seven months later. These findings provide a contextual understanding of prejudice and its negative effects on how adolescents come to relate with one another over time.