Principals are confronted with an exceptional degree of difficult decisions. One of the key challenges that school principals are facing in many parts of the world today is how to maintain a balance between professional discretion and accountability with the legislative and policy framework in which they must perform their duties. Every judgement call made by a principal will inevitably be questioned. However, without discretionary powers it would be impossible to be a principal. This paper therefore explores the application of professional discretion by school principals by focusing on different components of professional discretion, principals' need for autonomy, discretionary power of principals, principles governing the application of professional discretion, and the factors that influence or limit discretion. [For the complete Volume 20 proceedings, see ED622631.]