This article examines three possible mechanisms for the effects of first-grade reading-group placement. The first is that ability-group effects are instructional, influencing students' learning through quantity, quality, and pace of instruction. The second is that the effects are social, influencing children's expectations of their own performance and their self-concepts. The third is that the effects are institutional, influencing the expectations and perceptions of significant others, such as parents and teachers, independent of students' actual performance. Using data from the Beginning School Study, the authors found substantial evidence of instructional effects of ability-group placements and no support for the social effects of ability grouping; the findings for institutional effects were only suggestive.