This study addresses the effect that grade retention has on dropping out of school. A structural model was developed to test the effect of grade retention on dropping out while controlling for the effects of other possible mediating variables, especially achievement. This model with slight modifications was applied across four different school districts: Austin, Chicago, and two unnamed districts, one a high socioeconomic status suburban district in the Northeast, and the other a large urban district in the Southwest. Conclusions suggest that a causal connection between retention and dropping out exists; however, the model does not explain why retained students are more likely to drop out. Appended are 10 references and 5 figures. (SI)