Disparities in health and mental health between sexual‐minority and heterosexual individuals emerge in early adolescence, in large part because sexual‐minority individuals are stigmatized. In this article, I review and synthesize the role of gender nonconformity in shaping how adolescents experience the stigma associated with sexual‐minority status. Then, I review research with adolescents and emerging adults that shows that gender nonconformity is associated with variation in harassment and mental health outcomes both within sexual‐minority groups and between sexual‐minority and heterosexual groups. Next, I discuss gender nonconformity as a construct that influences the association between sexual‐minority status and peer relations, and between peer relations and individual psychosocial outcomes. Finally, I discuss the importance of addressing stigma related to gender nonconformity.