The goal of this study was to broaden the developmental understanding of the implications of interparental conflict (IPC) and threat appraisals of conflict for adolescents’ relationships with peers. Guided by the cognitive contextual framework and evolutionary perspectives, we evaluated a developmental model in which adolescents who are exposed to IPC perceive these conflicts as threatening to their well-being or that of their family. In turn, threat appraisals of IPC increase risk that adolescents experience worries and fears about the peer context (i.e., social anxiety), leading to decreased support from friends and increased feelings of loneliness and engagement with antisocial peers. Autoregressive analyses were conducted with a sample of 768 two-parent families across four measurement occasions. Exposure to IPC was related to increases in youths’ perceived threat, which increased their risk for social anxiety symptoms. Consistent with our hypothesis, heightened social anxiety symptoms undermined youths’ subsequent functioning in the peer context. Specifically, youth with greater adolescent social anxiety symptoms experienced increased feelings of loneliness and decreased perceptions of friendship support. Significant indirect effects were substantiated for adolescent loneliness and friendship support. Findings did not vary as a function of adolescent gender. The findings highlight the enduring implications of IPC and threat appraisals of IPC for youths’ functioning, which can be expanded beyond broad measures of youth psychopathology, and the critical role of social anxiety symptoms as an explanatory mechanism in this process.