The deliberate assignment of students to groups, generally grades and classrooms, is an integral part of education in schools; in addition, tracks, streams, and ability groups are created in many educational systems. The resulting partitioning of students is referred to here as the organizational differentiation of students. The purpose of this paper is to analyze the consequences of various forms of organizational differentiation in regard to opportunities and achievements of students. Organizational differentiation may affect student outcomes through a number of mechanisms--by creating career trajectories in a system and thus structuring educational opportunities; by creating different learning and social environments relevant for academic achievement and socialization; and by creating a set of signals about the competencies and likely futures of students relevant to the decision-making of teachers, parents, and students. The main proposal of the present paper is to recognize in future research that the organizational differentiation of students defines a structure of flows in an educational system. The processes that govern the flows are a far broader research topic than the isolated concerns for the existence of an origin bias in assignment or a learning effect of ability grouping. (Author/IRT)