Background: For over a hundred years, there have been efforts to change the way that schools transmit knowledge. Most of these efforts have failed. The most common explanations found in educational research for this are either: 1) macro-social, according to which social interests and powers hinder these changes. 2) teacher-oriented, according to which the teachers themselves either resist those changes or/and lack the training and qualifications necessary to carry them out. Although these explanations have a lot of truth to them, they ignore a crucial point, a "missing link" between teaching and subject matter, and society. Every educational institution has a special structure for organizing knowledge. This structure is independent in many respects from macro-social factors, as well as from teacher behavior, and it has important effects on the ways educational institutions deal with knowledge. Educational research has not yet provided a detailed and focused examination of "the institutional organization of knowledge" in education. Focus of Study: The article focuses on "the institutional organization of knowledge" in education. This concept refers to the procedures for arranging knowledge that precede the activity of teachers in the classrooms (teaching) and the subject matter learned (content). It thus encompasses everything that exists in an educational institution that is related to how the learned knowledge is organized before the teacher even begins teaching a particular subject in the classroom. The article examines its vital implications for the field of education. Research Design: A theoretical essay that presents a conceptual framework for understanding the institutional level of the educational system. Conclusions: The lack of a focused conceptual discussion and empirical research guided by theory regarding the institutional level of education prevents us from properly understanding the educational system and, no less important, from successfully changing it. The article outlines two main models of organization of knowledge for educational purposes that have taken over the field of education in the modern world. One is the model of inculcating existing knowledge and the other focuses on producing new knowledge. Both of these models have been found to be inappropriate for general education. Therefore, one of the most important challenges facing the world of education today is to create a new model of the institutional organization of knowledge for the benefit of general education