This report provides statistics on students discharged as dropouts during the 1984-85 school year. Annual dropout percentages are presented for individual high schools, for all high schools, and system-wide. In addition, the projected four-year dropout rate is presented for the high schools and for all schools in the system serving students age 14 and over. Dropouts are defined as those students who left school without receiving a diploma, who did not enroll in another educational setting, and who have not been counted as dropouts in previous years. The major finding reported is that, for the first time since the school system began producing annual dropout reports in 1978, there has been a clear decline in the dropout rate. A total of 9.4 percent of the city's 261,000 high school students were first-time dropouts in 1984-85, as were 10.3 percent of the 307,000 students age 14 and over, system-wide. Improvement occurred in every part of the school system, particularly among students making the transition from middle to high school. Accompanied by an increase in the rate of high school graduates, the decline in the dropout rate indicates that the school system is increasing its holding power. The report includes five statistical tables and four appendices: (1) a description of study procedures; (2) admission and discharge codes; (3) history of dropout accounting in New York City; and (4) data on dropouts and graduates, 1984-85. (KH)