The purpose of this study was to develop, validate, and describe indicators of educational disadvantage to be used in Australia to identify schools and students most in need of assistance from the Disadvantaged Schools Program. Initially, a detailed review was prepared of the resource allocation responses which have been made in Australia to the changing concept of equality of educational opportunity. Next a theoretical model was developed which was designed to quantify the optimal level of precision with which these responses could be used to allocate resources. The data obtained from a national study conducted during 1975 of the educational achievements of Australian 10-year-old and 14-year-old students in the areas of reading, writing, and numeration were then used to develop criterion and validation measures for the construction of indicators of educational disadvantage. These data were combined with data from the 1971 Australian Census of Population and Housing which provided detailed descriptions of the students' neighborhoods. These combined data were divided according to age level and aggregated over schools. Following an analysis of indicator characteristics, the indicator with the best overall performance was examined with respect to the dimensions of residential differentiation associated with the Shevky-Bell model. It was demonstrated that neighborhoods associated with educationally disadvantaged schools were characterized by an overlapping network of social features associated with the socioeconomic status, ethnicity, and family living arrangements of the community. (RM)