Data were collected in a teacher effectiveness study on the interaction of teachers and first grade students while the students participated in reading groups within intact classrooms. The teacher behavior variables were then related to students achievement using three units of analysis: class means, reading group means within classes, and student scores within reading groups. Results revealed that relationships differed depending upon the level of the analysis. Particularly striking was the large number of significant relationships which occurred only at the student-within-reading-group level. Apparently, some variables took on different meanings in the correct context of a small group, implying that students were very much aware of and affected by their learning environment. The results demonstrate that a combination of within-class and between-class analyses provides a better understanding of the relationship of teacher-student interactions to student achievement than either within-class or between-class analyses alone. (Author)