Adolescents with homosexual and bisexual orientations have higher levels of psychological distress than other adolescents. Drawing from previous studies, I hypothesize that this epidemiological pattern is due largely to the interpersonal problems that sexual minorities experience at home and at school. Analysis of longitudinal data based on a nationally representative sample showed that sexual minorities in fact experienced more problems with their parents and peers at school; these factors explained a moderate portion of the gap in distress level between sexual minorities and other adolescents. Adolescent friendships in general tend to develop within groups of individuals who share social backgrounds, but this pattern did not apply to sexual orientation; sexual minorities were not connected closely with each other at school. When they knew each other, however, their friendships reduced psychological distress and protected them from the psychological harm associated with interpersonal problems. I use these findings to discuss unique aspects of adolescent sexual orientation as a dimension of social inequality, focusing on implications for coping behaviors and mental health outcomes. (Contains 1 figure, 11 footnotes and 5 tables.)