This four-year longitudinal study attempted to test person-environment interaction theory and biological sensitivity theory by assessing whether individuals’ biological stress activity CARAUCg (Cortisol Awakening Response Area Under the Curve with respect to ground) moderates the effects of neighbourhood density on the development of adolescent externalizing problem behaviours. Participants were 358 Dutch adolescents with a mean age of 15 years at the first measurement. Our analyses showed that CARAUCg moderated the effects of neighbourhood density on the level of parent-reported delinquency and aggression and adolescent self-reported delinquency. More specifically, for adolescents with high CARAUCg, higher neighbourhood density significantly predicted higher levels of parent-reported and adolescent self-reported delinquency and aggression, whereas the association was reversed or non-significant for adolescents with low CARAUCg. Our findings suggest that adolescents with different levels of CARAUCg respond differentially to the density of the neighbourhood they live in, supporting for person-environment interaction perspectives and biological sensitivity theory.