A number of lines of research (e.g., National Commission on Teaching and America's Future, 1996; Slavin & Fashola, 1998; Wright, Horn, & Sanders, 1997; Bembry, Jordan, Gomez, Anderson, & Mendro, 1998; Ferguson & Ladd, 1996) have identified teacher instructional capacity as a key variable in the success of educational reforms in improving student achievement. Since 2000, the Consortium for Policy Research in Education has been studying a new form of teacher compensation that may have the potential to support improvements in the capacity of teachers to deliver instruction that would enable all children to achieve to high academic standards, as well as to respond to the growing public concern that there be some link between teacher salaries and teacher performance. This innovation -- knowledge and skill-based pay -- rewards teachers with base pay increases and/or bonuses for acquiring and demonstrating specific knowledge and skills needed to meet educational goals, such as improving student achievement. The application of this pay concept to K-12 education has been suggested by Conley and Odden (1995), Mohrman, Morhman, and Odden (1996), and Odden and Kelley (1997). This report examines a study of seven knowledge and skill-based pay systems for teachers that have been developed by U.S. schools or districts.