A study compared the reading placement levels of Chapter 1 students as indicated by dynamic and static assessment models to determine whether these students could benefit from basal instruction at a higher level of difficulty than would normally be indicated by static assessment. Subjects, 21 third grade Chapter 1 students, received treatment based on the dynamic assessment paradigm (modeling reading behavior, asking leading questions, and engaging the student in a dialogue) or the static paradigm (standardized tests) of reading level placement. Results indicated that the impact of the dynamic paradigm was to raise the reading level from third to fourth grade. Findings support the use of L. S. Vygotsky's zone of proximal development concept in developing dynamic procedures for reading assessment. (Two tables of data are included; 21 references and examples of word mediation are attached.) (RS)