This paper attempts to identify leadership practices of school principals as they engaged in exploring and exploiting possibilities in and around the school contexts to develop school capacity for change. Based on interview data of school principals, this paper shows that the capabilities of school leaders to perceive and exploit situated possibilities to build school capacity are one of the key factors differentiating different levels of implementation efforts. Three school capacity-building practices are found to constitute efficacious principal leadership in contexts of educational change, namely fostering teacher learning in communities of practice and teacher participation in decision-making; promoting school-community connections to facilitate student learning through participation; and aligning external demands and schools' internal circumstances. Implications for developing efficacious principal leadership in school capacity building are discussed.