A study of inner-city youth in San Francisco (California) shows that behavior and street ideology once associated exclusively with gangs have now become the world view of a large segment of inner-city young people, especially males. Inner-city young people who aspire to material success do not see a realistic connection between public education and the world of work. From 1981 to 1990 the Youth Environment Study addressed the twin issues of drug use and the AIDS epidemic in San Francisco (California) in areas with the heaviest concentration of families and youth living in poverty. This study, updated by 30 additional interviews with city adolescents, has identified 4 essential aspects of growing up in the inner city as crucial to understanding behaviors and planning services: (1) the overriding importance of ethnic or racial identity; (2) the existence of a street system of social guidelines for youth; (3) increased importance of drug use and drug dealing as a means of socialization and income; and (4) the rise in the use of violence with advanced weaponry. In the competition between the criminal justice system and the educational system for young people, the criminal justice system has been winning. New policy directions are needed to reconsider the current prohibitionist drug policy, bringing fewer youths into the criminal justice system, and improve the educational system's use of natural neighborhood street systems. (SLD)