Adolescence is an important neurodevelopmental period marked by rapidly escalating rates of alcohol and drug use. Over the past decade, research has attempted to disentangle pre- and post-substance use effects on brain development by using sophisticated longitudinal designs. This review focuses on recent, prospective studies and addresses the following important questions: (1) what neuropsychological and neural features predate adolescent substance use, making youth more vulnerable to engage in heavy alcohol or drug use, and (2) how does heavy alcohol and drug use affect normal neural development and cognitive functioning? Findings suggest that pre-existing neural features that relate to increased substance use during adolescence include poorer neuropsychological functioning on tests of inhibition and working memory, smaller gray and white matter volume, changes in white matter integrity, and altered brain activation during inhibition, working memory, reward, and resting state. After substance use is initiated, alcohol and marijuana use are associated with poorer cognitive functioning on tests of verbal memory, visuospatial functioning, psychomotor speed, working memory, attention, cognitive control, and overall IQ. Heavy alcohol use during adolescence is related to accelerated decreases in gray matter and attenuated increases in white matter volume, as well as increased brain activation during tasks of inhibition and working memory, relative to controls. Larger longitudinal studies with more diverse samples are needed to better understand the interactive effects of alcohol, marijuana, and other substances, as well as the role of sex, co-occurring psychopathology, genetics, sleep, and age of initiation on substance use.