This study explores the effects of the social context of Chapter 1 prekindergarten classrooms on children's learning. Chapter 1 (also called Title I) is a federal government preschool program directed at children in low-income schools who are at risk of later school failure. Using hierarchical linear modeling (HLM) and a sample of 677 4-year-olds in 55 1990-91 Chapter 1 prekindergarten classes in 5 states, the study explores factors that influence gains on the Preschool Inventory (PSI) over the preschool year. Social context is defined here mainly in terms of the cognitive and social composition of the classroom. Contextual factors defined in terms of demographics are shown to be related to learning, but the average cognitive level of the class is not. On average, children learn less in classrooms with high concentrations of minorities, children with special needs, recent immigrants, and children whose mothers have little education. The study explores differential effects of racial concentration on race differences in learning. Policy implications are discussed.