Juvenile justice-involved youth experience high rates of substance use, which is concerning given associated negative consequences, including health and functional deficits. Family and peer factors are associated with a high risk of substance use among justice-involved youth. It is hypothesized that this risk process operates through pro-drug attitudes. However, limited research has been conducted on the mechanisms through which family and peer factors increase risk for substance use among juvenile justice involved youth. The current study examined both the direct and indirect effects of family and peer substance use on youth's substance use (alcohol and illicit drug use). We also examined whether this relationship differs by race. 226 detained youth (81.9% male; 74.3% Black) were recruited from an urban county in the Midwest and completed a clinical interview and substance use assessment battery. A direct effect of family/peer risk on illicit drug use was found for all youth, though the effect was stronger among White youth. Results also supported the indirect effect pathway from family/peer risk to both illicit drug use and alcohol use through prodrug attitudes. This pathway did not vary by race. These findings suggest that interventions should focus on targeting both family/peer risk and pro-drug attitudes to reduce substance use. Given the racial difference in the direct effect of family/peer risk on illicit drug use, there may be other factors that influence risk more strongly for White youth, which warrants further investigation.