This article examines the transition of Chinese painting from "literati painting", exclusive to the scholar-amateur or scholar elite--the backbone of the Chinese traditional culture--to a new genre, "guohua" (national or traditional Chinese painting). It studies the role of artistic institutions in this process, using the Shanghai Fine Arts College as an example. This research draws upon a number of primary sources to shed light on the way in which modern art schools institutionalized literati painting, and the rationale of guohua education in the Chinese Painting Department in the College. This research shows that while competing with professional artists teaching in private studios, the College developed its own pattern of guohua education which preserved literati painting principles and enhanced efficiency in teaching technical skills but was intrinsically weak in inculcating the scholarly spiritual content of literati painting. Thus, the College played a role in developing a style of semantically exhausted literati painting known as guohua. (Contains 22 endnotes and 10 figures.)