In a 4-year longitudinal study, the authors investigated effects of retention in first grade on children's externalizing and internalizing behaviors; social acceptance; and behavioral, cognitive, and affective engagement. From a large multiethnic sample (n = 784) of children below the median on literacy at school entrance, 124 retained children were matched with 251 promoted children on the basis of propensity scores (probability of being retained in first grade estimated from 72 baseline variables). Relative to promoted children, retained children were found to benefit from retention in both the short and longer terms with respect to decreased teacher-rated hyperactivity, decreased peer-rated sadness and withdrawal, and increased teacher-rated behavioral engagement. Retained children had a short-term increase in mean peer-rated liking and school belongingness relative to promoted children, but this advantage showed a substantial decrease in the longer term. Retention had a positive short-term effect on children's perceived school belonging and a positive longer term effect on perceived academic self-efficacy. Retention may bestow advantages in the short-term, but longer term detrimental effects on social acceptance may lead to the documented longer term negative effects of retention.Keywords grade retention; growth curve model; propensity score; optimal matching; psychosocial outcomes For at least the past 4 decades, grade retention, the practice of having a student who has been in a given grade level for a full school year to remain at that level for a subsequent school year, has been a common but controversial educational practice (Holmes, 1989;Jackson, 1975;Lorence, 2006). With the increase in high stakes testing that began in the early 1990s and the related requirement that students meet grade-level academic competencies, grade retention has increased in frequency (Bali, Anagnostopoulos, & Roberts, 2005;Gootman, 2005;Roderick & Nagaoka, 2005). In 2004, U.S. Census data revealed that 9.6% of U.S. youths ages 16-19 years had been retained in grade one or more times. In Texas, the location of the current study, during the 2003-2004 school year, retention in first grade, the focal grade in the current study, was 6. 4%, compared with 5.8% in 1994-1995, prior (Texas Education Agency, 2005). These data suggest an increase of more than 10%, as compared with a decade earlier, in the proportion of children being retained in first grade.Given the prevalence of grade retention, one might expect that it enjoys strong empirical support. On the contrary, the current empirical evidence of the effects of grade retention on both academic and social-emotional adjustment is inconsistent but is widely characterized in published literature as negative (for meta-analyses, see Holmes, 1989;Jimerson, 2001a; for narrative reviews, see Jimerson, 2001b;Shepard, Smith, & Marion, 1996). However, the widely acknowledged methodological limitations of published studies make it difficult to reach firm conclusions regarding a caus...