Although the special education system has become a central institutional mechanism for addressing school failure and low achievement, it is a system unresponsive to the needs of Chicano students. Despite the severity of problems of school failure for Chicano students, interactions with the special education system have largely been characterized by antagonism and apprehension. The potential of special education for addressing this issue is hindered by continued reliance on a paradigmatic model with roots in the medical treatment of severe and organic disabilities. This model continues to be influential although the population served now consists mainly of children with mild learning problems without medical basis and, increasingly, children with diverse cultural and linguistic backgrounds. This prevailing model tends to view culture as a minor factor in learning, and low achievement as a child-centered phenomenon, while emphasizing classificatory uses of student assessment with only minimal applicability to meaningful classroom practice. As a result of legal controversy, much of the work on Chicano students in special education has focused on assessment, specifically claims of bias in intelligence tests, and resulting restrictive and stigmatizing placements. However, a literature review suggests problems in referral, diagnostic, and instructional practices as well. Promising areas for research and policy development include examination of current eligibility determination procedures and funding mechanisms; merger of special, regular, and bilingual education; reconceptualization of low achievement from a broader perspective; and development of more useful assessment practices. Contains 74 references. (SV)