Objectives Researchers have found a link between neighborhood risk factors and youth risk behaviors. However, the pathways by which this occurs remain poorly understood. This study sought to test a hypothesized pathway that suggests the influence of neighborhood risk on sexual risk and substance use among urban African American youth may operate indirectly via their psychological outlook about current and future opportunities. Methods Secondary data analysis using Structural Equation Modeling (SEM) was used to test the conceptual framework. The sample included 592 African American youth (61% female, 39% male) mean age 15.58 years, 1.23 SD. A modified structural equation model (SEM) met pre-specified global fit index criteria. Results The model contained three indirect paths linking increased neighborhood risk to increased sexual risk and substance use through higher levels of psychological outlook and youth approval of substance use. Conclusions These findings increase our understanding of factors that influence the initiation and progression of substance use and sexual risk behaviors among urban African American adolescents.