The relevance of the school context to creating a successful learning environment and promoting teachers' instructional quality is not yet clear. In the current study, we examine whether schools differ in aspects of instructional quality (i.e., classroom management and task feedback) and whether differences between schools can be explained by school characteristics (i.e., social composition, school's academic track, principals' leadership, teacher collaboration, and school climate). Therefore, we model instructional quality both at teacher and school level and include multiple perspectives on the school context. German Programme for International Student Assessment (PISA) 2003 data were re-analyzed, resulting in data from 1,939 teachers and their principals in 198 schools. Multilevel analyses revealed that schools differ systematically in their instructional quality. These differences were related to social composition, principals' leadership, teacher collaboration, and school climate. Accordingly, schools have the potential to promote instructional quality. However, teachers' perceptions of school characteristics are more relevant than those of the principals.