Adolescent participation in extracurricular activities is associated with numerous positive outcomes, yet the mechanisms underlying this relationship are largely unknown. This study had two goals: to investigate the association between participation in extracurricular activities and indicators of positive and negative development for Australian adolescents; and to determine if these associations were mediated by the characteristics of adolescents’ friends. Extracurricular participation was positively associated with higher academic track enrolment, university aspirations, and school belonging, and negatively associated with skipping school; participation in team sports was related to greater alcohol use. In addition, friend characteristics were found to mediate the association between activity participation and developmental indicators.