This report for individuals and organizations engaged in literacy outreach activities explores a youth agency-based, social service professional-facilitated strategy for reaching out-of-school youth. Chapter I describes the growing problem of school dropout. Chapter II synthesizes governmental and scholarly studies of youth and schooling, reporting findings on the numbers and identity of early school leavers and their social and economic prospects. Various analyses of dropouts' attitudes toward schooling and reasons for leaving are reviewed. In Chapter III, descriptions of youth life--in alternative educational programs, in the labor force, as heads of households, and on the streets--are offered. Chapter IV reviews literature findings about dropouts' actual skill levels and explores actual functions of literacy in the youth street culture. Chapter V outlines the advocated intervention strategy, which draws on two critical perspectives: the functional approach to literacy training developed by adult educators and based on use of materials of immediate interest and use to the learner and youth service workers' approaches to working with out-of-school youth. Chapter VI is an annotated listing of reports, teaching materials, and other resources for youth literacy program developers. (YLB)