Student engagement is an important determinant of both academic achievement and subjective well-being. Crucially, engagement has been linked to individuallevel flow, a psychological state characterized by intense enjoyment and complete absorption in an activity. Building on existing concepts, we propose an extension of the flow concept to the group level and argue that teaching is most effective when students working together enter a state of Bshared interactive flow^where they communicate effortlessly and facilitate each other's thought processes. Both causes and effects of interactive flow were investigated in a field study based on a newly developed questionnaire. Students from six different undergraduate psychology courses were measured three times during one semester, yielding 341 observations. The experience of interactive flow was highly correlated with interest in course contents, perceived group competence, the amount of own and group verbal contributions, satisfaction and learning success. Differences in measures acquired before and after classes point to the existence of two virtuous circles: group competence and interest facilitate the occurrence of interactive flow which in turn leads to increasing interest and perceptions of higher group competence. In practical terms, this suggests that teachers can make use of these feedback loops by instilling group-level efficacy beliefs in their students and ensuring that the initial topics of a classroom session are particularly captivating.