Collaborative learning in an online classroom can take the form of discussion among the whole class or within smaller groups. This paper addresses the latter, examining first whether assessment makes a difference to the level of learner participation and then considering other factors involved in creating effective collaborative learning groups. Data collected over a three year period (15 cohorts) from the Foundations course in the Master of Distance Education (MDE) program offered jointly by University of Maryland University College (UMUC) and the University of Oldenburg does not support the authors' original hypothesis that assessment makes a significant difference to learner participation levels in small group learning projects and leads them to question how much emphasis should be placed on grading work completed in study groups to the exclusion of other strategies. Drawing on observations of two MDE courses, including the Foundations course, their extensive online teaching experience, and a review of the literature, the authors identify factors other than grading that contribute positively to the effectiveness of small collaborative learning groups in the online environment. In particular, the paper focuses on specific instructional strategies that facilitate learner participation in small group projects, which result in an enhanced sense of community, increased skill acquisition, and better learning outcomes. (Contains 2 figures and 1 table.)