Current conceptions of literacy and what being literate means are discussed, and the strengths and weaknesses of the standardized multiple-choice test as a tool for assessing literacy proficiency and a way to report learning progress are explored. The possible advantages of alternative assessment strategies are reviewed, and an assessment model is proposed to ensure the optimal acquisition of literacy and external accountability. Literacy is a complex phenomenon, not a monolithic state with processes that can be captured by a single instrument. It has been argued that the standardized multiple-choice test format has driven instruction toward lower-order cognitive skills, and that such a test puts both teacher and learner in passive, reactive roles. The available standardized testing system rests on the faulty assumptions that literacy is a unitary state of being and that its development follows a linear line. Alternative assessment, regardless of the terms used to label it, is alternative to standardized achievement tests in that it examines learners' performances on significant tasks related to real-life achievement outside the classroom. The process-oriented and classroom-embedded nature of alternative assessment holds the promise of giving useful feedback for the improvement of instruction. Theories of social constructivism and sociocultural perspectives have indicated that learning is inherently social. To promote real learning, a model based on these theories suggests that it is important to align the curriculum with the child's individual growth, to understand classroom assessment procedures, and to know class members and their abilities. (Contains 35 references.) (SLD)