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Research indicates that family incarceration is predictive of youth offending, but the mechanisms that may explain this relationship are understudied. Prior research is often informed by strain theory, arguing that family incarceration introduces financial hardship and reduces social support for youth and their families, both of which are associated with offending. However, insights from labeling and social learning theories offer another potential mechanism explaining this relationship: Family incarceration may trigger an indirect stigmatizing process for youth, increasing the likelihood that they will associate with and be influenced by delinquent peers. Guided by this theorizing we test two hypotheses: (1) Family incarceration will be predictive of youth offending and (2) this relationship will be mediated by association with delinquent peers. We test these hypotheses using data from the Project on Human Development in Chicago Neighborhoods. We find support for each hypothesis. Our results offer new insight into the salience of family incarceration and its stigmatic effect for youth.