Education scholars document notable racial differences in teachers’ perceptions of students’ academic skills. Using data from the Early Childhood Longitudinal Study-Kindergarten Cohort, this study advances research on teacher perceptions by investigating whether racial differences in teachers’ evaluations of first grade students’ overall literacy skills vary for high, average, and low performing students. Results highlight both the overall accuracy of teachers’ perceptions, and the extent and nature of possible inaccuracies, as demonstrated by remaining racial gaps net literacy test performance. Racial differences in teachers’ perceptions of Black, non-White Latino, and Asian students (compared to White students) exist net teacher and school characteristics and vary considerably across literacy skill levels. Skill specific literacy assessments appear to explain the remaining racial gap for Asian students, but not for Black and non-White Latino students. Implications of these findings for education scholarship, gifted education, and the achievement gap are discussed.