We examined whether discrimination experienced by Hispanic/Latino adolescents is associated (a) directly with adolescent alcohol use or (b) indirectly with adolescent alcohol use via mediation by ethnic identity and/or peer associations. Data were drawn from an NIAAA-funded randomized controlled trial evaluating the efficacy of a Guided-Self Change intervention for Hispanic/Latino youth with alcohol and interpersonal violence problems (R01 AA12180; see Wagner et al., 2014). The current sample included 371 Hispanic/Latino teenagers (mean age = 16.3 years [SD = 1.37]; 38% female). Using structural equation modeling (SEM), results revealed that perceived discrimination was indirectly related to alcohol consumption through positive (non-drinking) peer affiliations. Additionally, ethnic identity was found to moderate the relationship between discrimination and positive peer affiliation. These findings further our understanding about how discrimination and ethnic identity interact, as well as provide directions for how the effectiveness of prevention models may be enhanced for reducing underage drinking among Hispanic/Latino adolescents.