Objectives: We examine the impacts of adolescent arrest on friendship networks. In particular, we extend labeling theory by testing hypotheses for three potential mechanisms of interpersonal exclusion related to the stigma of arrest: rejection, withdrawal, and homophily. Method: We use longitudinal data on 48 peer networks from PROSPER, a study of rural youth followed through middle and high school. We test our hypotheses using stochastic actor–based models. Results: Our findings suggest that arrested youth are less likely to receive friendship ties from school peers and are also less likely to extend them. Moreover, these negative associations are attenuated by higher levels of risky behaviors among peers, suggesting that results are driven by exclusion from normative rather than nonnormative friendships. We find evidence of homophily on arrest but it appears to be driven by other selection mechanisms rather than a direct preference for similarity on arrest. Conclusions: Overall, our findings speak to how an arrest may foster social exclusion in rural schools, thereby limiting social capital for already disadvantaged youth.