This study examines the impact of ability grouping practices on the achievement gains among African Americans and Hispanics during elementary school. Using data from the Early Childhood Longitudinal Study, the results strongly support the differential effects hypothesis of ability grouping. That is, students who are lower grouped for reading instruction learn substantially less, and higher-grouped students learn slightly more over the first few years of school, compared to students who are in classrooms that do not practice grouping. Overall, the results of our study call into question the notion that ability grouping is a beneficial practice in the earliest years of schooling. (Contains 3 tables and 10 notes.)