School-based teacher learning activities constitute a bottom-up approach to knowledge development which encourages teachers to search for good practices based on individual and collective efforts. In China, engaging in these learning programmes has been institutionalized as a daily practice of teachers. This qualitative study uses the concept of 'knowledge conversion' as an analytical lens to examine how 35 teachers from three schools in Shanghai develop their knowledge derived from participating in these learning activities. Results show that teachers in China use socialization (tacit knowledge acquired through individual interactions) and externalization (theorizing individual tacit knowledge) to develop sympathized and conceptual knowledge, respectively. However, successful internalization of this knowledge to the point of becoming operationally systematised is rare. Knowledge development in schools seems to involve knowledge adaptation and transfer rather than creation. Most of the teacher-participants apply an 'exploitative' learning approach which reinforces and refines existing practices and values in their professional development. However, reprofessionalization of teachers takes place through participating in research projects, writing papers and cases. These activities provide an opportunity for teachers to engage in 'exploratory' learning by which teachers can develop innovative practices with support from colleagues or outside experts. This learning approach can lead to both teacher development and school improvement by helping teachers construct their 'know-why' knowledge. Importantly, a network of schools and teachers is necessary for establishing an exploratory learning approach. This, however, can result in inequality of learning opportunities for teachers who do not have such networks, which would ultimately limit the effects of such a learning approach.