Extensive research documents that social network characteristics affect health, but knowledge of peer networks of youth in Malawi and sub-Saharan Africa is limited. We examine the networks and social participation of youth living in extreme poverty in rural Malawi, using in-depth interviews with 32 youth and caregivers. We describe youth’s peer networks and assess how gender and the context of extreme poverty influence their networks and participation, and how their networks influence health. In-school youth had larger, more interactive, and more supportive networks than out-of-school youth, and girls described less social participation and more isolation than boys. Youth exchanged social support and influence within their networks that helped cope with poverty-induced stress and sadness, and encouraged protective sexual health practices. However, poverty hampered their involvement in school, religious schools, and community organizations, directly through lack of required material means, and indirectly by reducing time and emotional resources and creating shame and stigma. Poverty alleviation policy holds promise for improving youth’s social wellbeing and mental and physical health by increasing their opportunities to form networks, receive social support, and experience positive influence.