This Special Report surveys existing conditions for Latino [superscript 1] language minority students in Indiana's schools and identifies the most significant problems and challenges for improving their learning. The report opens with an overview of recent demographic shifts in Indiana's K-12 student population, and makes an important distinction between Indiana's long-standing and newcomer Latino populations; the latter account for the dramatic increase in the language minority population. The report then considers the culturally competent psychological assessment of ELL students. School psychologists, especially, bear the responsibility of balancing formal with informal assessments that take into account the unique cultural characteristics of this student population. Similarly, special education teachers and counselors must grapple with the issue of disproportionality in special education referrals. The report updates our knowledge of special education referrals amongst the Latino population, and provides important observations about how best to diagnose and refer these students. This Special Report draws on a number of qualitative studies around the state of Indiana to illustrate the current social climate for Latino language minority students in our schools. Although research finds much that is positive occurring in schools, it also finds that schools often segregate language minority students for purposes of "effective instruction" or concentration of resources, and that such segregation may be counterproductive socially, as well as pedagogically. Research also finds that peer relations between language minority students and their English-speaking peers may be fraught with misunderstanding and ridicule, while teacher and administrator attitudes do little to communicate a sense of true belonging and community membership. Moreover, efforts at "parental involvement" often encounter obstacles because of problematic assumptions of teachers and administrators, including the sense that a "language barrier" is due exclusively to the parents' lack of initiative or ability to learn English. The report offers a brief account of the "funds of knowledge" approach of Gonzalez, Moll, and Amanti (2005) as one potential reform which could meet many of the challenges of educating Latino language minority students. Finally, the report concludes with several recommendations, including innovations or resource investments in peer socialization, parental involvement, literacy development, and cultural competency. The authors suggest that the broad goal of developing cultural competency amongst all Hoosiers means that providing language minority students with more educational opportunities is an investment in the education of everyone. (Contains 3 tables and 11 endnotes.)