This paper addresses the controversy regarding the use of cooperative learning with gifted elementary students, by means of participant observation methodology. The study had three segments: (1) observation of fourth through sixth grade gifted students working in cooperative groups at a pullout site; (2) interviews with students to assess student understanding of and attitudes toward cooperative learning; and (3) interviews with teachers on their use of cooperative learning and perceptions of gifted students' responses. Results supported the use of cooperative learning with gifted students in heterogeneous or homogeneous settings. Observation indicated that students in cooperative learning groups demonstrated the social and academic behaviors cited in cooperative learning literature. No evidence was found indicating lowered academic achievement, though students did work at the pace of their group. Students reported they learned from nongifted group members as well as peers. Recommendations address appropriate and inappropriate uses of cooperative learning with gifted students. Appendices contain a list of characteristics of cooperative learning, a processing sheet to be filled out by the group at the end of the lesson, and individual evaluation sheets. (Contains 29 references.) (DB)