American Indian students generally have not done well on traditional standardized tests. Such tests have been criticized because their ability to predict academic success is questionable, and they correlate with socioeconomic class, reward superficial learning, encourage classroom practices that fail to provide high-quality education, and are culture and gender biased. In contrast, authentic or performance-based assessment allows students to construct, rather than select, responses. An ongoing assessment based on observations of student behavior on tasks, performance-based assessment evaluates the learning of critical thinking skills, demonstration of applied knowledge, and performance of tasks in the real world. American Indians have historically used performance-based assessment, and the adoption of this method may provide the first fair indication of what Indian children know and can do. New performance-based methods of assessing student learning are being developed, and all schools receiving Title I funds are required to have performance-based assessment systems in place by the 2000-2001 school year. The Bureau of Indian Affairs has adopted the Learning Record, developed in Great Britain and adapted for use in California, as the performance-based assessment system to be phased in over 3 years. Although performance-based assessment has great potential for American Indian education, Indian educators can also improve assessment by promoting the inclusion of oratory skills to balance reading skills, by ensuring culturally relevant curriculum, and by factoring in students' language and experience when judging their abilities. Contains endnotes and a bibliography. (TD)