Objective: To describe recent trends in adolescent sexual behavior in Cape Town, South Africa, and to determine whether household and community poverty and negative economic shocks predict risky sexual behavior.\n\nData: Matched survey data on 2993 African and coloured youth from the Cape Area Panel Study 2002 and 2005.\n\nMain outcome measures: Sexual debut, multiple sexual partners in past year, condom use at last sex, measured in 2002 and 2005.\n\nMethods: We tested for changes over time in reported sexual behavior and estimate multivariate probit models to measure the association between 2002 individual, household and community characteristics and 2005 sexual behavior.\n\nResults: There was a statistically significant increase in condom use and a decrease in the incidence of multiple sexual partners between 2002 and 2005 for young women aged 17-22 years. Young women in households with 10% higher income were 0.53% less likely to debut sexually by 2005; young men in communities with a 10% higher poverty rate were 5% less likely to report condom use at last sex. Negative economic shocks are associated with a 0.04% increase in the probability of multiple partnerships for young women. Education is positively correlated with sexual debut for young women and with multiple partnerships for both sexes.\n\nConclusion: Trends in sexual behavior between 2002 and 2005 indicate significant shifts towards safer practices. There is little evidence of a relationship between negative economic shocks, household and community poverty, and risky behavior. We hypothesize that the unexpected positive relationship between education and sexual debut may be driven by peer effects in schools with substantial age mixing.\n