Despite the growing attention on teachers’ grading practices in educational research, less attention has been dedicated to the consequences of teachers’ grading standards on students’ educational outcomes, especially in early stages of their scholastic career. This paper aims at filling this gap, analyzing the impact of teacher’s severity in grading on students’ competences development and academic track enrollment, and how it varies according to students’ gender, socio-economic background and immigrant status. The analysis relies on Italian INVALSI-SNV data: information on 5th graders and their teachers are linked, and pupils are followed up to 8th and 10th grade, in which their competences and school track are recorded. Trough 2SLS regressions we demonstrate that being exposed to stricter grading in 5th grade leads to higher students’ competences later on, and to higher probability to enroll in the most prestigious academic track, with no notable heterogeneous effects across students with different sociodemographic characteristics.