Nigeria's National Policy on Education stresses functional knowledge and skills, and development of character and values. But there is a growing gap between policy and practice. This is apparent in the unethical behaviour of many students, and sometimes staff, as manifested in their involvement in secret cults, undisciplined conduct, and examination malpractices. This paper examines the causes of the ethical crisis. These include uncoordinated and poorly funded expansion of education; the educational pyramid which is very broad-based but very narrow at the top, leading to acute competition for available places; pressure from parents on children to study courses for which they ill-qualified; emphasis on selective examinations and certificates; and the general corruption in society. Educational administrators and teachers have a responsibility to salvage the system from the ethical crisis by the innovative strategies employed in managing institutions and programmes, and by being the models. We need values education in the curriculum. Government, parents and law enforcement agents must support the leadership efforts of school administrators. Parents need enlightenment and attitudinal re-orientation in order to collaborate with teachers in counseling students to imbibe the culture of ethical values and responsible behaviour at home and school.