Acknowledging that clear standards and strong incentives alone are not sufficient to dramatically change teaching and learning, policymakers and policy analysts have started to talk about and implement "capacity-building" strategies. "Capacity" in this policy context refers to the wherewithal needed to translate high standards and incentives into effective instruction and strong student performance. This study examines capacity-building strategies used in eight states and analyzes their promise and continuing challenges. The eight states represent various approaches to systemic improvement. They include California, Colorado, Florida, Kentucky, Maryland, Michigan, Minnesota, and Texas. The study asks the following questions: (1) What are common patterns in the ways states currently build capacity for education reform, and why? (2) What are promising directions, as well as challenges, that emerge from these policy strategies? and (3) What related matters should policymakers consider when they use these strategies? [This document is a reissue of the 1998 CPRE Research Report RR-41 under the same title (ED426490).]