This report provides and analyzes statistics on students discharged as dropouts from New York City schools during 1985-86. 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. For the second year in a row, there has been a clear decline in the dropout rate. A total of 7.9 percent of the city's 261,000 high school students were first-time dropouts in 1985-86, as were 8.8 percent of the 305,000 students age 14 and over, system-wide. The continued decline in the dropout rate indicates that the school system is achieving success at improving holding power. The report includes six statistical tables and the following six appendices: (1) a description of study procedures; (2) admission and discharge codes; (3) history of dropout accounting in New York City; (4) data on dropouts and graduates, 1985-86; (5) data on 1985-86 dropouts by dropout category; and (6) annual dropout percentages for each New York City high school, 1982-83 to 1985-86. (KH)