This report is based on the first epidemiological investigation of clustering of tobacco, alcohol, inhalant, and other drug involvement within individual schools using data from Panama's 1996 National Youth Survey on Alcohol and Drug Use. Clustering was estimated with the Alternating Logistic Regression method. Adjusted estimates of pair-wise cross-product ratios (PWCPR), a measure of clustering, show modest clustering (i.e. PWCPR>1.0) at the school level for tobacco smoking (PWCPR=1.41; 95% confidence interval, CI=1.221.64), alcohol consumption (PWCPR=1.33; 95% CI=1.221.45), use of inhalants, (PWCPR=1.35; 95%CI=1.071.69), and other drug use (PWCPR=1.38; 95%CI=1.141.68). These findings provide preliminary evidence that the odds of drug use among school-attending youths increase when another youth in the same school uses drugs, and suggest a new line of research on within-school diffusion that should include the identification of school-level factors that contribute to student drug use.