This literature review concerns the concept of alternative grade configurations at the elementary level, in which elementary schools are subdivided into primary (K-2) and intermediate (3-5) units. Because of the paucity of literature on this concept, the major part of the report focuses on the reorganization of the elementary schools of the South Allegheny (Pennsylvania) school district. Although the K-2, 3-5 structure is often implemented in response to declining enrollment, other educational benefits cited may include better concentration on the educational and psychological needs of children in the two age groups, though one research study showed no significant differences in student achievement, attitude toward school, extracurricular participation, or career aspiration. The goals of the South Allegheny reorganization (in response to declining enrollment) were to equalize class sizes to facilitate multilevel instruction in reading and math, and to make better use of staff, school buildings, and instructional resources. Each of these objectives is described in detail, along with perceived disadvantages. An evaluative report revealed that the new grade structure saved money and resulted in improved discipline, student attitudes, and student interaction. Finally, literature on the implementation process is briefly reviewed, emphasizing the need for clear articulation between grade levels. Notes and references are included. (TE)