Objective: Social settings and situations of underage drinking were described for students from 15 communities in Minnesota and Wisconsin. Reports of their last drinking event, including setting, number of persons drinking with them, number of those persons under age 21, and whom they were with, were examined. The role of these variables in the prediction of having five or more drinks on one occasion was assessed. Method: Ninth graders (n = 2,269) and 12th graders (n = 2,377) who reported using alcohol in the last 30 days were included in the sample from a nested cross-sectional survey design. Bivariate analyses were performed between the situational variables and gender, number of older siblings and drinking behavior. Chi-square statistics were divided by an estimate of the design effect and multivariate analyses used mixed-model regression to correct for the nesting of individuals within communities. Results: Situations and settings of drinking differed according to age and drinking behavior. Twelfth graders were less likely to drink with parents or other adults than 9th graders and more likely to drink in someone else's home, and in large groups where nearly everyone was underage. Persons reporting having five or more drinks on one occasion in the last 2 weeks were more likely to report drinking with peers, in large groups of underage persons and away from home. Conclusions: Interventions to reduce use of alcohol by youth must focus on the context in which the drinking is taking place in addition to other factors. Policy or educational interventions that seek to alter the situations and settings of underage drinking may be effective in reducing consumption of alcohol in adolescents.