This study is focused on the threat of retention associated with test-based promotion in Grade 3. Through analyzing the Early Childhood Longitudinal Study Kindergarten Class of 1998-1999 data, we found that schools having such a policy apparently increased math instructional time but not reading instructional time in Grade 3. On average, the policy did not produce significant differences in third graders' reading and math learning. However, there seemed to be a notable increase in the proportion of students who achieved an at or above-average proficiency level in Grade 3 math. In both reading and math, the test-based promotion seemingly benefited students at the average or lower than average ability levels. In contrast, there was no evidence that the policy had an impact on students at the two ends of the ability distribution. We discussed the implication of the findings for the current design and implementation of test-based promotion in early grades.