This article focuses on the interaction between the larger community's drug markets and youth and adult prison gangs, and the process that leads to specific adverse consequences both to the youth gangs as organizations, and to individual members. Described is the emergence of a restructured heroin market dominated by an adult prison gang. A major consequence of this was the increasing use of heroin among Mexican American gang members and their transformation from autonomous youth gangs to extensions of the adult prison gangs or their demise. Data was collected from 160 members of 26 Mexican American youth gangs and key informants in San Antonio. Findings focus on organizational rules, drug market transformations, consequences on members, and the impact of heroin on the gang's organization. Discussed is how the dominance of prison gangs is related to the increased incarceration and recidivism rates of Mexican Americans and declining economic opportunities for urban minorities.