The aim of this study was to test a longitudinal, transactional model that describes how social withdrawal and friendship development are interrelated in late adolescence, and to investigate if post-secondary transitions are catalysts of change for highly withdrawn adolescents' friendships. Unilateral friendship data of 1,019 adolescents (61.3% female, 91% Dutch-origin) from the Tracking Adolescents' Individual Lives Survey (TRAILS) cohort were collected five times from ages 17 to 18 years. Social withdrawal was assessed at 16 and 19 years. The transactional model was tested within a Structural Equation Modeling framework, with intercepts and slopes of friendship quantity, quality, and stability as mediators and residential transitions, education transitions, and sex as moderators. The results confirmed the presence of a transactional relation between withdrawal and friendship quality. Whereas higher age 16 withdrawal predicted having fewer, lower-quality, and less-stable friendships, only having lower-quality friendships, in turn, predicted higher age 19 withdrawal, especially in girls. Residential transitions were catalysts of change for highly withdrawn youth's number of friends: higher withdrawal predicted a moderate increase in number of friends for adolescents who relocated, and no change for those who made an educational transition or did not transition. Taken together, these results indicate that the quality of friendships-over and above number of friends and the stability of those friendships-is particularly important for entrenching or diminishing withdrawal in late adolescence, and that relocating provides an opportunity for withdrawn late adolescents to expand their friendship networks.