The effect of retention in first grade (Year 1) on parents’ educational expectations was tested in a sample of 530 ethnically diverse and academically at risk children. Participants attended one of three school districts in Texas. Of the 530 children, 118 were retained in first grade. Retention had a negative effect on parent expectations in Year 2, which was maintained in Year 3. Year 2 parent expectations partially mediated the effect of retention in first grade on Year 3 reading and math achievement and child academic self-efficacy. All effects controlled for Year 1 measures of the outcome. Results were similar across gender, economic adversity, and ethnicity. Implications for minimizing the negative effect of retention on parents’ expectations are suggested.