OBJECTIVES: We examine how the racial/ethnic and generational status composition of Latino students' friendship groups is related to their academic achievement and whether there are differential effects by gender. METHODS: We use multivariate regression analyses to examine the effects of friends' characteristics on Latino students' end of high school grades, utilizing data from the Adolescent Health and Academic Achievement Study (AHAA), and its parent survey, the National Longitudinal Study of Adolescent Health (Add Health). RESULTS: For Latina girls, there are positive effects of having more friendship ties to third-plus-generation Latino peers in contrast to dominant culture peers; yet Latino boys benefit academically from ties to all co-ethnic peers. Having friends with higher parental education promotes achievement of both genders. CONCLUSION: Our results counter notions of a pervasive negative peer influence of minority youth and suggest that co-ethnic ties are an important source of social capital for Latino students' achievement.