Background and Aims Sexual minority adolescents are more likely to engage in alcohol use than their heterosexual counterparts; however, the underlying reasons remain unclear and longitudinal research is limited. Owing to evidence that this group also experiences greater depressive symptoms than their peers, we aimed to (i) assess to what extent depressed mood explains the increased likelihood of engaging in alcohol use among sexual minority adolescents, and (ii) explore potential gender‐specific patterns. Design Structural equation modelling was used to test the indirect relationship between sexual orientation and alcohol use through depressed mood, with heterosexuals as the reference group. Settings and Participants A total of 3710 adolescents (12% sexual minority), from the Avon Longitudinal Study of Parents and Children (ALSPAC) study, assessed between the ages of 15 and 18 years. Measurements Sexual orientation was assessed at age 15, while alcohol use was measured using the Alcohol Use Disorders Identification Test (AUDIT) at age 18. Depressed mood was indexed by the Short Mood and Feelings Questionnaire (SMFQ) at age 16. Findings Sexual minority adolescents were more likely to engage in alcohol problem use compared to their heterosexual counterparts [Btotal = 0.12, 95%confidence interval (CI) = 0.04–0.20, P = 0.003]. Depressed mood explained 21% of the link between sexual orientation and alcohol use after adjustment for covariates and earlier measures (Z = 3.2, P = 0.001). No gender differences were observed. Conclusions A higher prevalence of alcohol problem use in adolescents who are gay, lesbian or bisexual is partly explained by increased rates of depression in this group.