Objective: To determine whether value-added education is associated with lower risk of substance use among adolescents: early initiation of alcohol use (regular monthly alcohol consumption in grade 7), heavy alcohol use (> 10 units per week) and regular illicit drug use. Design: Cross-sectional self-reported survey of alcohol and drug use. Analysis used two-level logistic modelling to relate schools providing value-added education with pupils' substance use. The value-added education measure was derived from educational and parenting theories proposing that schools providing appropriate support and control enhance pupil functioning. It was operationalised by comparing observed and expected examination success and truancy rates among schools. Expected examination success and truancy rates were based on schools' sociodemographic profiles. Participants: Data were collected across 15 West Midlands English school districts and included 25 789 pupils in grades 7, 9 and 11 from 166 UK secondary schools. Results: Value-added education was associated with reduced risk of early alcohol initiation (OR (95% CI) 0.87 (0.78 to 0.95)) heavy alcohol consumption (OR 0.91 (0.85 to 0.96)) and illicit drug use (OR 0.90 (0.82 to 0.98)) after adjusting for gender, grade, ethnicity, housing tenure, eligibility for free school meal, drinking with parents and neighbourhood deprivation. Conclusions: The prevalence of substance use in school is influenced by the school culture. Understanding the mechanism through which the school can add value to the educational experience of pupils may lead to effective prevention programmes.