Higher density of alcohol outlets has been linked to increased levels of adolescent alcohol-related behaviour. Research to date has been cross-sectional. A longitudinal design using two waves of annual survey data from the Australian arm of the International Youth Development Study was used. The sample comprised 2835 individuals with average age at wave 2 of 14 years (SD=1.67; range=11-17 years). GSEM was used to examine how absolute levels of alcohol outlet density was associated with student-reported alcohol use one year later, while controlling for prior alcohol use, risk factors at wave one and changes in density over the 2 years. Adolescents' perception of alcohol availability and friends' alcohol use were tested as potential mediators of the association between alcohol outlet density and adolescent alcohol use. Elasticity modelling identified a 10% increase in overall density at wave one was associated with an approximately 17% increase in odds of adolescent alcohol consumption at wave two. Living in areas with a higher density of outlets was associated with a statistically significant increase in the likelihood of adolescents developing early age alcohol consumption.