The article reports the findings of a qualitative case study in one elementary school in Iceland. The aim was to investigate the level of leadership capacity within the school, and how this had evolved through the school's improvement. Information was gathered over one school year about planned improvements that had taken place in the school over the 10-year period prior to the study. Data was collected through observations, document analysis, semi-structured interviews, informal conversations and a survey. Participants came from all sectors of the school community. A conceptual framework developed by Lambert (2003a) was used to analyse the leadership capacity within the school. The findings show that the leadership capacity of the school, and of groups within the school, had grown considerably during the period under study and was connected to the degree of involvement in school improvement work. The findings indicated an interactive relationship between school improvement and the building of leadership capacity during the period under study.