Systematic observation was carried out in 12 classrooms (six in an innovative literacy programme which was a precursor to the Literacy Hour and six comparison classes) to explore teaching and learning which occurred after an intensive in-service programme for reception teachers. Altogether 216 children were observed in an inner-city authority, each for 15 minutes according to a schedule of time-sampled and event-sampled categories. Teaching behaviours were included in the observations as well as pupils' learning activities related to curriculum areas and also to play or 'domestic classroom' routines. Results showed that children devoted about equal amounts of time to English in the two types of classrooms and that staff-pupil ratios were also similar. There were no differences in the amount of whole class, group or individual learning observed. However, teachers in the intervention classrooms (Focused Literacy Teaching) were more likely to use 'direct teaching' methods which included managing children's activities and using questions to instruct. Teachers in the comparison classes spent more time in 'physical caring'. There were also differences in pupil learning activities. Although there were no differences in the amount of time children read to a teacher in the two types of classroom, children in the literacy programme spent more time reading to one other child, to a small group and on their own. Moreover, children in the literacy programme spent more time in shared reading and writing. In contrast, children in the comparison classrooms spent more time drawing, colouring and playing. Thus, a striking finding was the greater amount of peer literacy learning in the innovative classrooms. Teachers spent time setting up and managing the literacy activities of the groups, although often the groups continued under their own steam once the learning activity had been started. This led to a greater focus on reading, not only as a result of the teacher's direct teaching, but also through collaborative group work and children learning on their own.