Being the target of peer victimization contributes to alcohol and cigarette use during early adolescence. This 1-year longitudinal study extended the current literature by investigating the potential links between peer victimization and alcohol and cigarette initiation among a sample of 723 youths recruited from three middle schools in Southern China. We proposed a moderated mediation model to examine whether peer victimization is indirectly related to substance use via deviant peer affiliation, and whether the strength of this mediation is moderated by the level of parental knowledge for both genders. All participants self-reported using questionnaires to assess peer victimization, deviant peer affiliation, parental knowledge, and substance use. The results revealed that peer victimization was indirectly associated with increased alcohol use via deviant peer affiliation for both genders. However, deviant peer affiliation mediated the impact of peer victimization on trying cigarettes for only boys. Moreover, parental knowledge acted as a protective role for increases in alcohol use for girls, but not for boys. These findings highlight the potential role of deviant peer affiliation to explain the relationship between peer victimization and substance use, and provide important implications for addressing the adverse consequences of peer victimization.