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Interactional theory posits a reciprocal relationship among drug use, association with drug using peers, and beliefs about drug use. Using five waves of data from a panel study of high-risk adolescents, two models are estimated to examine these assumptions. The results support the main hypotheses from interactional theory. Drug use and peer drug use are involved in a reciprocal causal relationship with the effect from drug use to peer drug use being slightly larger. Beliefs about drug use and drug use are also reciprocally related although the effect of beliefs on drug use is relatively weak. The effect of peer drug use on beliefs is stronger in later waves as compared to earlier waves, supporting interactional theory's assumptions about the importance of taking into account developmental stages of drug use. The importance of these findings for both theoretical development and intervention strategies is discussed.