This state-of-the-art report on interactive video and instruction begins with a brief review of the current status of technology and technology transfer in schools. The nature of interactive video is then considered, including instructional applications of the technology and the components of an interactive video instructional system. Discussion of interactive video systems in the classroom provides a holistic view of computers and imagery in instruction together with a summary of implementation issues related to six components of such a system, i.e., video monitors, computers, software, interface devices or cables, videodisc or videotape data, and videodisc or videotape players. Five examples of classroom applications are then described: (1) Laser Learning Reading Program for teaching middle grade students reading comprehension; (2) Target Interactive Project (TIP), alcohol and drug education; (3) Project CENT, consumer education; (4) the National Gallery of Art Program; and (5) Project Interact, which is designed to help teachers transfer interactive technology into classrooms across all subjects and grades. The effectiveness of interactive video systems is then explored in the context of research on computer-based instruction and research on interactive video, and an agenda for future interactive video research is proposed. A look at some current and future developments in videodisc and interactive video technologies and their role in the school of the future concludes the report. (74 references) (DB)