In this paper we show that when growth options represent a significant component of overall firm value, equity financing can dominate (i.e., be less dilutive than) debt financing under asymmetric information. In particular, we find that equity is more likely to dominate debt for younger firms with larger investment needs and with riskier growth opportunities. Thus, our model can explain why high-growth firms may prefer equity over debt, and then switch to debt financing as they mature. We also find that equity financing can be relatively more attractive when a firm already has debt in its capital structure. Finally, we show that equity can dominate debt in multidivisional firms, and we provide new predictions on the cross-sectional variation of capital structures.