I propose a theory of social structure that challenges the widely accepted role of preferential attachment and triadic closure as primary mechanisms of network formation. For this, I build upon Feld's concept of social circles, Breiger’s concept of the duality of actors and groups, and Hinde’s concept of interactions and relationships. The theory emphasizes that ties between actors arise and evolve according to social circles and social situations in which they participate, a notion straightforwardly modeled through two-mode and projected networks. Using recent results aided by analyses of empirical and artificial networks, I argue that structural properties such as tie strength, heterogeneity of popularity and strength among actors, clustering, community formation, and segregation emerge from homophily, jointly with overlap and social activity—mechanisms introduced in this study. The mechanisms form the two-mode network, and these structural properties naturally arise in the one-mode projection. The results show that social circle and social situation size distributions modulate network structures by interweaving with social activity distributions, and that overlap increases segregation from a network viewpoint. This theory’s implications are broad, affecting several social processes ranging from social cohesion, tolerance, and child development to the spread of infectious diseases.