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Drawing on national and state assessment datasets in reading and math, this study tested "external" versus "internal" standards-based education models. The goal was to understand whether and how student performance standards work in multilayered school systems under No Child Left Behind Act of 2001 (NCLB). Under the "external" model, states' common standards shape teachers' standards which, in turn, affect student achievement. Under the "internal" model, teacher standards are insulated from state standards but instead influenced by prior student achievement and background characteristics in classrooms. The study employed multilevel analysis and instrumental variable analysis with fixed effects. Findings provided support for the internal as opposed to the external model. The linkage between state standards and teacher standards was tenuous, whereas the linkage between teacher standards and student achievement was solid and reciprocal. Further, students' gender, race/ethnicity, and socioeconomic status (SES) had direct and/or indirect influences on teacher standards through achievement gaps. Implications for research and policy were discussed.