Across the country, grade promotion is tied increasingly to performance on standardized tests. One concern about such policies is that they might increase dropout rates. Policy proponents counter that adverse effects of grade retention should be more than offset by beneficial effects from rising achievement. Using data from Chicago, this study examines dropout rates after implementation of an eighth-grade promotion standard. The results indicate that retention by the policy did have adverse effects on dropping out, but the relationship was smaller than seen with traditional teacher-initiated retention and was unrelated to the timing of dropping out. Systemwide, slight decreases in dropout rates among the 90% of students who were not retained counterbalanced the higher dropout rates among those retained. (Contains 3 tables, 3 figures and 50 footnotes.)