This paper investigates the relationship between adolescent sport participation and alcohol use, focusing on differences in sport contexts. We also include the wider social context, the role of peers and parents as key variables in our analysis. Our sample consists of a nationally representative sample of 10,992 Icelandic adolescents. The findings indicate that adolescents that participate in formally organized sport clubs are less likely to use alcohol than those that do not. The results obtained for participation in informal sport are in the reverse direction, indicating that adolescents that do only informal sport are more likely to use alcohol than those that do not. Moreover, it was found that the well-known relationship between adolescent alcohol use and having alcohol-using friends was contingent on formal sport participation. We also find that the influence of low parental monitoring and time spent with parents and broken family structure on alcohol use becomes significantly weaker with greater involvement in formal sport. In other words, sport participation in formal sport is more relevant for those groups of adolescents that are at most risk for using alcohol, since it buffers the effects of known risk factors on alcohol use. Participation in informal sport does not, however, show such buffering effects. The findings further highlight the need to consider the wider social context as well as differences in sport organization and sport contexts while studying the potential effects of sports on adolescent alcohol use.