Misperceptions of peer substance use (SU) are believed to be a robust correlate of adolescent SU; however, perceived peer SU is biased in the direction of an adolescent’s own SU raising questions about the validity of perceived peer SU (social norms; Henry, Kobus, & Schoeny, 2011). In addition, social norm theories emphasize inaccurate perceptions of peer SU while other theories emphasize actual peer behavior and selection of friends as motivators of adolescent SU. Furthermore, no theories consider the role of accurate perceptions, suggesting the need to more carefully consider the coevolution of perceived peer norms, actual peer behavior, and adolescent SU. To do this, we modeled the latent structure of accurate and inaccurate perceptions of peer SU while including an adolescent’s own SU using latent class analysis and tested the natural evolution of the classes using latent transition analysis. The design included 3 annual assessments of peer and perceptions of peer SU and 6 assessments of adolescent SU (N = 765; age = 10–13 at Wave 1; female = 53%). Latent class analysis findings largely replicated Henry et al. (2011), suggesting that misperceptions of peer SU were biased by an adolescent’s own SU. We also found 3 distinct pathways to a high risk class that predicted high levels of later adolescent SU, 2 in which adolescent and perceived peer SU preceded peer SU (age = 10–12 and 12–14) and another in which peer SU preceded adolescent SU and perceptions of peer SU (age = 12–14). Implications for peer influence theories are discussed.