External diagnosis is recommended when schools lack the capacity to assess their needs. This qualitative study of one Ontario district compared 33 elementary schools that conducted external diagnosis with 47 schools that used internal diagnosis. External diagnosis created pressure for change, helped schools develop a plan that included previously neglected needs, promoted consistency within and between schools, contributed to the improvement culture of the school, and encouraged shared instructional leadership. It also depressed teacher efficacy and commitment to school improvement. Positive effects of external diagnosis were facilitated and negative effects mitigated by principals who adopted shared instructional leadership strategies.