The 16-year-old from London paid £175 for a room at the Cambridge House guest house using a false name.
Lewes Crown Court heard how he was seen continually leaving and returning at the Cambridge Road hotel during his week-long stay.
Suspicious owners Geoffrey and Beverley Barber called police after finding drugs and a knife while cleaning his room.
The youth, who cannot be named, was arrested outside the address and was found to be in possession of a total of £747.51 in cash.
Police also seized a lock knife, 22.5 grammes of heroin, 14 grammes of crack cocaine and 227mg of cannabis.
The youngster, of Lambeth, pleaded guilty to possession of class A drugs with intent to supply.
Prosecutor Karen Holt told the court the defendant booked the room using the name John Jameson on December 30 last year.
She said, "He attended the following day using that name and paid £175 in cash for the room.
"During his stay that week he came down frequently for breakfast and was seen continually leaving and returning. He often seemed to have people with him.
"It was decided by the Barbers that they would clean his room on January 4.
During the course of cleaning his room, some packages were seen.
"Mrs Barber thought they were drugs and also noticed a knife. She called the police and officers attended.
"At about 1.50pm they found him walking on the pavement close to the address. They identified themselves as police and asked if he was John Jameson.
"He said no and then gave his real name which he confirmed with a travel card. He was then told he was the subject of a drugs search.
"When asked if he has any drugs he said he had but he had just found them. He was also found with keys associating him with the Cambridge House address."
The teenager was arrested and taken to the police station where a search revealed a lock knife between two pairs of boxer shorts he was wearing.
A total of £320 in cash was also seized from under the soles of his trainers and further cash was found in his room.
In interview he told police he had been sent to he Cambridge House hotel to supply packages for no less than £5 each but sometimes sold them for £10 each.
He said he suspected they were drugs but never knew for sure what they were.
He said he planned to stop supplying after the first handover but was scared of what harm may come to him or his family although he never received threats.
Judge David Rennie gave the teenager an 18-month supervision order after hearing he had served the equivalent of an eight-month jail sentence.
He told him, "This conduct was wholly out of character and I recognise you were acting at the behest of one or more older people.
"But for that influence I am satisfied that you would not have behaved in this way. Generally, only immediate custody can be justified for supplying class A drugs.
"They kill and they ruin lives and that is how some people choose to make their living. This is what you got wrapped up in, albeit for a short while."