This paper describes an ethnographic study of school and community characteristics affecting the literacy development of Navajo children, and provides an overview of sociocultural factors in the literacy environment of one Navajo community. The researcher was a principal at Pinon Public School District #4 in Pinon, Arizona, in the heart of the Navajo Reservation. Data sources included 6 months of participant observations in two grade-6 classrooms; structured interviews with teachers, parents, and students; a parent survey about home literacy characteristics; school records; and the researcher/principal's daily journal entries. The findings suggest that sociocultural factors and cultural dissonance directly affect the literacy development of Pinon students. A summary of factors impacting educational outcomes at Pinon discusses: (1) the growth of employment opportunities on the reservation for professionals, particularly in government; (2) the influence of the extended family; (3) trends toward smaller families and declining use of the Navajo language; (4) increased contact with mainstream society, particularly through the mass media; (5) rural-urban differences in living conditions; (6) traditionalism and the continued importance of healing ceremonies; (7) changes in lifestyle and livelihood; (8) increased tribal involvement in the four types of reservation schools; (9) diminished influence of the Mormon placement program; and (10) increased opportunities for higher education. (SV)