This Bulletin investigates the role of the principal in fostering a school climate conducive to collegial supervision--teachers observing teachers and working together for instructional improvement. Chapter 1 attempts to put into perspective the traditional responsibilities of the principal as instructional leader and teacher evaluator. Collegial supervision can be seen as a partial solution to the problem of finding the time and the personnel to support a thorough teacher evaluation program. Chapter 2 investigates the principal's role in establishing a context for collegial supervision. Principals must foster a climate for collegiality, establish a structure for peer supervision, and then combine the two into a program in which teachers can share their professional expertise. The structure of supervision and the operation of a collegial supervision program are the subjects of chapters 3 and 4, respectively. The final chapter suggests that the principal's role as instructional leader be restructured to meet the demands of modern school systems. This redesigned role emphasizes both the importance of the principal's involvement in the peer supervision process and the increased professional responsibility of teachers. Appended are 15 references. (MLF)