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Previous studies have shown a strong correlation between depression and smoking, but the mechanism underlying the relationship is not well understood. This study examined whether the prevalence of smoking in schools influences the relationship between smoking and depression symptoms at the individual level. Information on demographics, tobacco use, and depression symptoms for 3,382 students in Grades 7–12 from 126 schools in Ontario, Canada, was obtained from the 2003 Ontario Student Drug Use Survey (E. Adlaf & A. Paglia, 2003). The effect of school-level smoking was strongly negative (coefficient = −1.05, p = .01), suggesting that depression and smoking at the individual level were strongly related in schools with a lower smoking prevalence but that this relationship diminished as the prevalence of smoking increased. Contextual effects may be important to understanding the link between smoking and depression in adolescents.