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This paper bridges the gap between the teacher effectiveness and peer effects literatures, by studying how the effectiveness of different teaching practices vary by classroom composition. We combine random assignment of teachers to classrooms with rich measures of teaching practice to overcome key endogeneity concerns related to measurement and matching. We find that good classroom management skills create an environment where students benefit more from peer average initial achievement. We also show that challenge/student-centered practices are most effective when there is less heterogeneity in initial achievement of classmates. Our findings illustrate the importance of taking classroom composition into account when evaluating teachers and/or prescribing teaching practice and highlight new challenges for measuring teacher effectiveness and peer effects.