Diversity and differentiation within our classrooms, at all levels of education, is nowadays a fact. It has been one of the biggest challenges for educators to respond to the needs of all students in such a mixed-ability classroom. Teachers' inability to deal with students with different levels of readiness in a different way leads to school failure and all the negative outcomes that come with it. Differentiation of teaching and learning helps addressing this problem by respecting the different levels that exist in the classroom, and by responding to the needs of each learner. This article presents an action research study where a team of mathematics instructors and an expert in curriculum development developed and implemented a differentiated instruction learning environment in a first-year engineering calculus class at a university in Cyprus. This study provides evidence that differentiated instruction has a positive effect on student engagement and motivation and improves students' understanding of difficult calculus concepts. (Contains 1 table and 1 figure.)