Much of the literature linking adversity to trauma fails to account for racialized experiences, including racial-ethnic discrimination, which is a highly prevalent form of adversity for youth of color in the U.S. Adversity and trauma often result in students experiencing elevated rule-breaking behaviors, exacerbating existing racial-ethnic disparities in disproportionate school discipline. Drawing from race-based trauma theory, the present study explored trauma as a mediator of the longitudinal association between racial-ethnic discrimination from teachers, other adults, and students in schools and rule-breaking behaviors among Latinx youth. Data were from a longitudinal study of 547 Latinx students in a southeastern U.S. state. Across gender and nativity groups, school racial-ethnic discrimination and trauma positively predicted later rule-breaking behaviors. Additionally, for girls only, increased levels of trauma partially explained the association between school racial-ethnic discrimination and rule-breaking behaviors. The study highlights the importance of addressing school racial-ethnic discrimination and trauma in equitable school metal health systems. Indeed, efforts aimed at reducing disproportionate school discipline among Latinx students should focus on reducing their exposure to school racial-ethnic discrimination and increasing access to trauma-informed and restorative justice approaches.