High schools organized into schools-within-schools (SWS) have the capacity to create social capital, a sense of trust and connection among teachers and students that can be used in the service of teaching and learning. These differentiated social groupings, or subunits, can influence members' sense of identity during the transition to high school, and may be especially important not only to the success of individual students but also to the success of the SWS structure. Social capital and identity are examined during students' entry year in four high schools with an SWS structure. It is argued that SWS designs that consider students' needs in the areas of social relations and identity have a greater potential for success than those that do not. Data were obtained through focus groups and individual interviews with staff and students in two or more subunits as well as school-level administrative staff. Findings indicate that social capital and identity formation appear to be mutually enhancing processes. An appendix provides a description of the larger study, including schools-within-schools high schools, their subunits, and research methods. (Contains 22 references.) (DFR)