Using linked individual and census tract data from the 1980 U.S. Census, it is found that when a teenage boy drops out of school depends not only on his family background and the increase in earnings associated with graduating, but also on the characteristics of the neighborhood in which he lives. Both the good and bad dimensions of neighborhood quality appear to influence dropping out of school. The relationships between some neighborhood variables and dropping out are not linear, but there is no evidence to support the theory of Johnathan Crane (1991) that when neighborhood quality falls below a critical level, school dropout rates increase sharply. Fifteen tables and two figures illustrate the analysis. Two appendixes consider sample selection and interactions between individual and neighborhood characteristics. (Contains 19 references.) (SLD)