The papers presented at this conference review current research on effective educational practices for low-achieving students and identify those that might be applied to programs funded under Chapter 1 of the Education Consolidation and Improvement Act of 1981 (the successor legislation to Title 1 of the Elementary Secondary Education Act of 1965). This paper reviews the literature about the effect on educational outcome of instructional setting, that is, the effect of pullout versus in-class instruction. Focusing on the early grades, the paper begins with the question: What do we know about the nature of instruction in Title I and Chapter 1 programs? It then provides answers to the following three questions: (1) What do the legislation, Congress, and the United States Department of Education say about the use of pullout and other models of instruction? (2) What is the impact of pullout instruction on students' achievement in reading, language arts, mathematics? and (3) What other effects of pullout versus in-class programs have been noted in the literature? Following these discussions, the paper briefly describes key variables and issues to consider in designating compensatory instruction programs, and finds that, despite a great deal of confusion and contradiction in the literature on the subject, it is safe to conclude that: (1) setting is not directly responsible for student outcomes; (2) it is the issue of effective practices, not setting, that deserves the attention of educators; and (3) it is important for educators to study what goes on within the different settings and how regular and compensatory instruction can be woven together to improve student performance. A list of references is appended. (PS)