The study of 150 adolescents aged between 16 and 21 receiving drug and alcohol treatment revealed cannabis was the most commonly used substance, with 56 per cent using the drug.
This was followed by 19 per cent who consumed alcohol, 13 per cent who used heroin and other opioids, while five per cent used stimulants such as amphetamines.
Associate Professor David Best from Turning Point Drug and Alcohol Centre, which carried out the study, said many of the young people used four or more drugs.
More than half - 55 per cent - had been diagnosed with a serious mental health disorder.
The study found 77 per cent were not employed or undertaking any education or training.
It also showed 37 per cent had lived on the streets and 36 per cent reported conflict with their families.
Assoc Prof Best said the most problematic young people were those with significant family conflict problems.
This group had the least resolved drug and alcohol problems by the end of the study, which ran from 2009 to 2011.
Assoc Prof Best said while researchers could not conclude that family conflict caused those youths' problems, there was no question it was an underlying factor throughout treatment at drug and alcohol services.
"The group of young people who seek treatment in this area have complex problems and it's not entirely clear that alcohol and drug use is their primary problem," Assoc Prof Best told AAP.
Young people who experienced an improvement in their family relationships were more likely to show the greatest improvement in their alcohol and drug use, he said.
"Young people's drug and alcohol treatment is effective and does lead to significant improvements," Assoc Prof Best said.
"However, the magnitude of the improvement is markedly greater where there's an improvement in domestic stability and family situation."
He said engaging young people in education or employment was also vital for a full recovery, and drug and alcohol treatment programs needed to improve their links with these other services.
The Youth Cohort Study research will be presented at Turning Point's annual symposium in Melbourne on Wednesday.