There has been ongoing concern about the negative impact of residential treatment on youth in care. Research examining the impact of negative peer influence in juvenile justice, education, and residential care settings is reviewed. A study was conducted to examine the impact of negative peer contagion on the level of problem behavior in a residential care program, and the extent to which caregiver experience and youth time-in-program mediated that relationship. The study used archival data for 1,438 first-time admissions to a large Midwestern out-of-home residential program for youth with emotional and behavioral problems. Hierarchical Linear Modeling was used to examine the relationship between daily reports of conduct and oppositional defiant disorder (CD/ODD) behaviors and the percentage of conduct disorder youth living in a home. Greater exposure to conduct disordered peers was not related to increased rates of CD/ODD behavior. CD/ODD behavior was directly related to direct care staff level of experience and youth time in program. Implications for residential care are discussed.