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Following the passage of No Child Left Behind, there has been increased attention on standards-based approaches to school improvement. This study examines the early implementation of mandated reform in the largely rural state of Maine requiring all public school districts to establish a proficiency-based diploma system by 2018. Using a qualitative approach to explore the impacts, costs and benefits in 17 case study schools and school districts, our findings suggest that benefits included improved student engagement, greater attention to academic intervention systems and more deliberate collaborative professional development. Challenges included establishing common definitions, public support, and time for professional work as well as building effective learning management systems and equitably addressing the needs of students at various developmental stages.