To examine how parental limit setting, family conflict, and perception of family experience influence severity of alcohol and drug problems, and important gender differences in these relationships, we interviewed consecutive intakes, aged 12 to 18 years, at 4 chemical dependency programs of a large group-model nonprofit health maintenance organization (HMO) (n=419). The Family Conflict, Limit Setting, and Positive Family Experience scales correlated with substance dependence (p<0.01, p<0.01, p<0.05, respectively). Depression also correlated with family conflict (p<0.01), absence of limit setting (p<0.01), poor family experience (p<0.01) and dependence symptoms (p<0.01). Number of substance-using friends correlated with number of dependence symptoms (p<0.01). Gender differences included the following: (1) girls scoring higher in family conflict (p=0.0002), negative perceptions of family experience (p<0.0017), and lower in absence of limit setting (p<0.0001); (2) how family environment predicted problem severity: absence of limit setting was significant for boys and girls but family conflict for boys only; (3) girls had more dependence symptoms (p=<0.0001), psychiatric diagnoses (e.g., depression (p<0.0003), anxiety (p<0.0002), conduct disorder (p=0.07)), and substance-abusing family members (53 % versus 39%; p=0.006). To conclude, family and peers influence severity of alcohol and drug problems in adolescents.