Immigrant students may use and develop language and literacy skills differently depending on the dominance of the first and second language (L1 and L2) in the neighborhoods where they live. In this study, neighborhood effects on students' reported language use at home and with peers, and on measured language and literacy proficiency, were investigated in a sample of 42 Turkish-Norwegian fifth-graders living in two cities in Norway. Differences were not found in the students' use of Turkish and Norwegian with family members, but the students living in the neighborhoods with co-ethnic concentration reported using more Turkish with peers across settings. Further, the students living in neighborhoods of more co-ethnics outperformed the students living in neighborhoods marked by fewer co-ethnics in Turkish proficiency, while students living in neighborhoods with fewer co-ethnics were more proficient in Norwegian vocabulary. An interesting finding was that in spite of differences in language use and vocabulary skills, there were no neighborhood effects on students' topic knowledge and L2 reading comprehension of content-area texts. Attending schools with many L1 peers may have offered access to L1-based information and topic knowledge (both through informal interactions and instruction in the L1) that supported the students' L2 content-area reading.