This paper reviews literacy and literacy assessment in America, in relation to the various National Assessment of Educational Progress (NAEP) reading assessments. Literacy can be defined and assessed only in relation to literacy demands. A current concept of literacy distinguishes between reading comprehension as an outcome of lexical access and comprehension processes, and literacy as the application of particular skills in a social context. Closely related to the changing definitions of literacy are the techniques employed for assessing literacy. The most refined literacy assessment to date is the NAEP Young Adult Literacy Survey. Analysis of the responses from this study show multiple dimensions to literacy. NAEP reading objectives have shifted from a behavioral to a process-oriented view. Scale scores (which may reduce the educational value of a test, but offer psychometric convenience) have replaced estimated percentage correct for items or item types. Several recommendations are made: (1) the NAEP Reading Assessment should focus on surveying the skills and attitudes of real-world literacy in youth and young adults; (2) NAEP's Reading Assessment should cover high school dropouts and young adults, as well as in-school students; (3) public reporting of NAEP assessment scores should emphasize item types, using weighted percentage correct; and (4) NAEP should report results objectively, without pressure to promote political agenda. (LMO)