Digital media is ubiquitous in adolescence and young adulthood. These are key developmental periods when people explore who they are and who they want to become. However, researchers have yet to fully understand digital media's role in shaping identity and its development. We build on prior work conceptualizing identity development as a contextually embedded process to describe how identity influences and is influenced by one's digital context. We propose a systematic framework for investigating the relationships between identity and digital environments (i.e., mediums and platforms, which vary according to their content and affordances) through four mechanisms: selection (i.e., choosing or avoiding digital environments), manipulation (i.e., intentionally altering or changing digital environments), evocation (i.e., unintentionally eliciting responses from digital environments), and application (i.e., integrating or applying experiences from digital environments). To conclude, we outline future directions for research that may clarify how identity development unfolds in the digital context.