In the context of market-oriented economic reforms that have prevailed in Latin America and much of the developing world, scholars and policymakers have begun to emphasize the need to reform areas of social policy. Education is particularly important, both in providing gains in social welfare and improvements in human capital that can enhance Mexico's competitiveness in the global marketplace. This study examines the determinants of the adoption of three specific primary education policy reform options across Mexican states: increased state education spending, enhanced teacher training initiatives, and merit pay programs. It explores the ways in which societal interests and institutional and structural contexts affect the probability of the adoption of these policies. In so doing, this work employs both qualitative and quantitative tools; an in-depth examination of three cases—Guanajuato, Michoacán, and Puebla—complements a broad statistical analysis of the 31 Mexican states. Among its key findings are that increased electoral competition has a generally positive effect on reform and that international economic integration has mixed consequences. However, most profound are the effects of the teachers' union, its internal politics, and the variation across the states in the process of deterioration in its traditional ties to government. This research stems from intensive field research in Mexico from 2002-2004. It builds on studies of the determinants of social spending levels in Europe and Latin America by moving from cross-national analysis to cross-state comparison within a single federal system. Furthermore, it contributes both theoretically and empirically to a nascent literature on the politics of social policy reform in developing countries.