Experiences of racial discrimination and social inequality are related to higher levels of psychological distress and substance use that may contribute to health disparities among youth. This within‐group quantitative survey study tested two alternative theoretical models of the relations between perceived racial discrimination, psychological distress, alcohol, and marijuana use in a sample of 567 African American high school students (61% female; mean age = 15.6 years). Path analyses indicated most support for a model linking perceived racial discrimination to more depressive symptoms that, in turn, were associated with greater past month alcohol and marijuana use. These findings expand our understanding of the direction of effects for exposure to racial discrimination in African American youth and reinforce the need for public health policies, research, and programs for African American youth that acknowledge and address the psychological effects of exposure to racial discrimination on alcohol and marijuana use.