The effects of learning potential and teacher expectancies on IQ, school achievement, and teacher ratings were studied in eight segregated special classes for the retarded. The 58 EMR subjects were divided into four groups in a two design. A strong learning potential effect and a weak teacher expectancy effect were found for the IQ variables. A consistent interaction effect was found for changes in both teacher ratings and school achievement in spelling showing unexpected inferiority of the High Learning Potential-High Expectancy group. The results indicated further support of the validity of learning potential measurement and demonstrate how mental retardation can become a self fulfilling prophecy. (Author)