This study examined the effect of institutional size on the six year institutional graduation rate for undergraduates, controlling for five variables known to affect graduation rate: (1) student academic preparation; (2) enrollment to dormitory capacity ratio; (3) percentage of part-time students; (4) expenditure per student; and (5) student to faculty ratio. Institution size was defined as the number of headcount students enrolled in the Fall semester of 1993. Data were gathered for 800 four-year postsecondary institutions from a variety of sources including the Integrated Postsecondary Education Survey (for headcount data) and several published national surveys of postsecondary institutions (for graduation rates, Scholastic Assessment Test scores, student-faculty ratios, and educational expense per student). Statistical analysis indicated that institutional size has a significant and negative influence on graduation rates. The state with three 10,000-student institutions can be expected to graduate 3 percent more students than the state having one 30,000-student institution. Application to the state plans of Florida and Pennsylvania suggest that nearly 1,000 fewer degrees can be expected in Florida than in Pennsylvania with $60 million of a $2 billion budget spent unproductively. Results have implications for the long range planning of state systems of higher education. (Contains 18 references.) (BF)