This paper provides a review of recent policy initiatives to reform teacher compensation systems and evidence regarding the effect of these policies. The first section examines the current structure of teacher compensation in the U.S. K-12 public education system. The compensation "system" for teachers is fragmented and uncoordinated. Teacher compensation is largely set by salary schedules that are neither market-oriented nor performance-driven. The second section reviews pay reforms being implemented in U.S. public school districts. The third section of the paper examines the small but growing evaluation literature on compensation reform, paying particular attention to evidence from studies using experimental and quasi-experimental designs to assess the impact of the program on student achievement and teacher outcomes. A final section provides observations on prospects for future reform, and suggestions for policy research. (Contains 6 tables and 10 footnotes.)