The Austrian "school autonomy policy", which allowed schools to develop specific "curricular profiles", is taken as an example for discussing processes and effects of school decentralization policies. Data from school case studies (based on qualitative interviews and document analysis) are used to analyse and interpret the processes by which schools and teachers take up policy innovations and translate it into action and structures on school and classroom level. These policy changes and the resulting governance regimes are examined from a perspective on changing modes of "action coordination" between actors on different levels of a school system and from an attention to processes of "re-contextualization" in multi-level governance systems. The main result is that the Austrian decentralization policy--although not explicitly based on a market approach--boosted principles of competitive coordination between schools. In consequence, it resulted in processes of differentiation and hierarchization of schools and classes and offered new legitimatory and practical opportunities for student selection.