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This study examines the impact of an Austrian grading reform introduced in 2020 on teachers’ grading practices for university entrance qualifications. Adopting a sequential explanatory mixed-methods design, we analyze longitudinal data on classroom grades (2017–2023) alongside in-depth interviews with German and mathematics teachers. The quantitative findings reveal significant and lasting grade inflation, particularly in mathematics, following the reform. Qualitative results reveal how the reform affected teachers’ grading behavior, often encouraging leniency and strategic decision-making to ensure student success. Furthermore, teachers reported experiencing internal conflicts and external pressures, as well as a perceived decline in grading standards. This study highlights the far-reaching and unintended consequences that structural policy changes can have on teachers’ grading in high-stakes assessment contexts.