This study tested a mediation model of neighborhood influences on children’s externalizing behavior. In the proposed model, neighborhood disadvantage, ethnic heterogeneity, and low residential stability affect children’s behavior indirectly through their impact on neighborhood social processes, which in turn influence parenting and deviant peer affiliations. A community sample of 704 preadolescents (76% African American, 22% Caucasian) and their parents and teachers provided information for the study. Neighborhood concentrated poverty, derived from the 2000 U.S. Census, was positively associated with children’s externalizing behavior. This effect was fully mediated by neighborhood social processes and parenting quality, while deviant peer affiliations made independent contributions to problem behavior. The final mediation model explained children’s externalizing behavior equally well across gender and ethnicity, suggesting the presence of universal processes.