In February 1994 the San Diego (California) Board of Education adopted a policy to bring about a phased reduction in class size in all district schools. Resources were allocated to initiate Phase I of this plan, which called for limited class size in grades 1 and 2 at all elementary sites to 25.5 students. A formative review was undertaken to determine the effectiveness of the policy before any decision is made about its expansion to other grade levels. Implementation and program effects were studied through surveys of 85 principals, 747 teachers in grades 1 and 2, 120 teachers of higher grades, and 5,216 parents as well as interviews completed by some teachers, parents, and administrators. Positive appraisals outweighed negative appraisals for all stakeholder groups, with teachers, in particular, very satisfied with the advantages class size reduction has brought their classrooms. Observational data from 36 classrooms also supported the effectiveness of the program. Roughly two of three teachers and principals believed that reduction in class size would have a positive impact on reading achievement by grade 3. Some suggested disadvantages were the belief that services in other grades would be adversely affected. Respondents criticized the program for a lack of professional support and staff development and its imposition from the district in a top-down approach. Eleven appendixes provide supplemental data about study methodology and findings. (Contains 8 tables, 19 figures, and 26 references.) (SLD)