This paper asks whether education is a viable route to better livelihoods and social inclusion for children living in poor urban areas in Dhaka, Bangladesh. It uses qualitative interviews with 36 students aged 11-16, living in slum and middle-class areas, and also draws on data from a larger, mixed-methods study to provide context. Many children from slums are excluded altogether from education, while others are incorporated into the system but on unfavourable terms. The paper identifies three principal ways in which this adverse incorporation can happen: through differential access to different types and quality of school; through obstacles that prevent children from poorer households from progressing through the system and reaching higher levels; and through subordinate power relations in the school, embodied in systems of assessment, labelling of students and discipline. These are likely to limit the potential for education to be a socially transformative institution.