This study aims to explore the understanding and actualization of teacher leadership among teachers and principals in the school development process. Teacher leadership is considered a powerful concept by providing teachers with the opportunity to contribute to sustainable school development by supporting professional development among their colleagues and improving teaching practices. Semi-structured interviews were conducted in five Estonian schools with sixteen teachers and five principals. Deductive and inductive approaches were applied to data analysis. Three analysis themes were used: (1) understanding of teacher leadership characteristics and activities of a teacher leader; (2) the impact and; (3) the conditions for teacher leadership. The results revealed that although some of the characteristics and activities coincided with earlier findings, teachers and principals in this study had a rather limited understanding of teacher leadership. Therefore, we argue that the concept of teacher leadership should be introduced much more systematically during initial teacher education and should be fundamental to the continuing professional development of the school development program. Furthermore, principals need to improve their skills as they play an influential role in creating a school environment that supports teachers to take the initiative.