In this 2-year prospective study, psychopathology and competence among drugabusers' offspring were examined in relation to characteristics of their neighborhoods. Thesample consisted of 77 children of cocaine and opioid addicts with a mean age of 12.3 years atbaseline and 14.2 years at follow-up. Outcomes examined included psychiatric diagnoses,dimensional symptom indices, and aspects of everyday behavioral competence. Links involvingneighborhood variables varied by gender, wherein boys reflected greater deterioration than girlswhen neighborhoods had high crime rates and high proportions of low-income households.Conversely, girls appeared to benefit more than boys from the presence of professional adults inthe community. Overall, neighborhood indicators accounted for more variability in changes inchild adjustment over time than did indices of maternal psychopathology. Findings are discussedin terms of developmental changes in the salience of exosystemic and familial forces, andimplications for interventions are outlined.