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OBJECTIVE The increasing importance of peers in adolescence and emerging adulthood has been widely acknowledged. However, longitudinal research linking the peer context to diabetes management and outcomes is scarce. The present longitudinal study in a large sample of youths with type 1 diabetes related both positive and negative peer variables to diabetes outcomes over a time interval of 1 year. RESEARCH DESIGN AND METHODS Our sample consisted of 467 adolescents (14–17 years of age) and emerging adults (18–25 years of age) with type 1 diabetes who participated in a two-wave longitudinal study. Questionnaires tapped into peer support, extreme peer orientation, parental responsiveness, diabetes-related distress, and treatment adherence. HbA1c values were obtained from the treating physicians of patients. Cross-lagged analysis from a structural equation modeling approach was performed to assess the directionality of effects. RESULTS Peer support negatively predicted diabetes-related distress over time. Extreme peer orientation positively predicted treatment distress over time. Parental responsiveness negatively predicted food distress over time. Treatment adherence negatively predicted extreme peer orientation, treatment distress, and HbA1c values over time. For emerging adults specifically, there was a reciprocal relationship between HbA1c values and extreme peer orientation because they positively predicted each other. CONCLUSIONS This study highlights the importance of peers in predicting the functioning of youths with type 1 diabetes. Additionally, treatment adherence at baseline was found to negatively predict extreme peer orientation, treatment distress, and worse glycemic control over time. In sum, the current study underscores the importance of the peer context for adolescents and emerging adults with type 1 diabetes.