This paper examines the impact of peer ability on student achievement, addressing the challenges of separating peer effects from other confounding influences. The authors use a unique matched panel dataset to control for important determinants of achievement, including student and school characteristics, and remove fixed effects to isolate the effects of peers. The analysis considers the reciprocal nature of peer interactions and the interpretation of estimates based on past achievement as a measure of peer group quality. The results indicate that higher-achieving peers positively affect achievement growth, benefiting students across the school test score distribution. However, the variance in achievement does not show a systematic effect. The study highlights the importance of controlling for omitted and mismeasured variables to accurately estimate peer effects and suggests that the composition of peer groups can significantly influence student outcomes.This paper examines the impact of peer ability on student achievement, addressing the challenges of separating peer effects from other confounding influences. The authors use a unique matched panel dataset to control for important determinants of achievement, including student and school characteristics, and remove fixed effects to isolate the effects of peers. The analysis considers the reciprocal nature of peer interactions and the interpretation of estimates based on past achievement as a measure of peer group quality. The results indicate that higher-achieving peers positively affect achievement growth, benefiting students across the school test score distribution. However, the variance in achievement does not show a systematic effect. The study highlights the importance of controlling for omitted and mismeasured variables to accurately estimate peer effects and suggests that the composition of peer groups can significantly influence student outcomes.