School policy on teaching and the school learning environment (SLE) are the main school factors of the dynamic model of educational effectiveness (Creemers & Kyriakides, 2008). A longitudinal study in which 50 primary schools, 108 classes, and 2369 students participated generated evidence supporting the validity of the dynamic model. This article reports the results of a re-analysis of the data of this study in order to search for direct and indirect effects of school factors included in the model. Using multilevel structural equation modelling techniques, indirect effects of school policy on teaching and SLE upon achievement in mathematics and Greek language are demonstrated. Implications of findings are drawn. Comparing the results of the multilevel direct and indirect effect model with those from using a multilevel regression model, we demonstrate the importance of choosing appropriate conceptual models and using relevant methodological approaches to understand the dynamic nature of educational effectiveness. (Contains 6 figures and 2 tables.)