This report claims that the special education system in the New York City public schools is by nature segregated and second rate. It offers recommendations for achieving a more inclusive, effective education for all children. Data are presented to support the charge that special education students are educated in restrictive and racially segregated environments. Administrative barriers to the inclusion of disabled children in general education classes are also identified. A section on the benefits of inclusion reviews the research and literature supporting this stand. A variety of models of inclusive education are described, including the Adaptive Learning Environments Model, the Integrated Classroom Model, consultant teaching, team teaching, cooperative learning, peer tutoring, and parent involvement. Twenty-four major recommendations are offered which would require a radical change in the current special education system. Recommendations include broadening the definition of children capable of being educated in general classrooms, improving the quality of classroom teaching, increasing the availability and quality of related services and instructional materials, and expanding the continuum of special education services. Appendices include: a discussion of federal and state law requirements addressing the least restrictive environment, evaluation and assessment, and research and program improvement; excerpts from relevant federal laws and regulations; and excerpts from relevant state law and regulations. (DB)