Background/Context The fulfillment of academic potential is an underdeveloped area of inquiry as it relates to explaining racial differences in academic outcomes. Examining this issue is important for addressing not only differences in the typical outcomes for African American and White students but also the severe underrepresentation of African American students among the highest achieving students. Whereas other studies have operationalized lost academic potential as unfulfilled expectations for educational attainment, this study takes a different approach, measuring whether students earn higher or lower grades than the grades predicted by earlier tests of academic skills. Students whose grades are equal to or exceed those predicted by their earlier test scores are said to have fulfilled their academic potential, whereas those whose grades are lower than predicted have not realized their potential. Purpose/Objective/Research Question/Focus of Study This study finds that African American high school students are less likely than their White peers to realize their academic potential. The analyses test several explanations for the racial gap in the realization of academic potential, focusing on the students themselves, their teachers, and their schools. Research Design This study uses hierarchical linear modeling to analyze data from the Education Longitudinal Study of 2002. Conclusions/Recommendations The results suggest that teachers perceive African American students as exerting less classroom effort than White students, which accounts for a substantial proportion of the racial gap in unrealized academic potential, even with several student characteristics held constant. At the school level, there are larger racial gaps in unrealized academic potential in segregated schools and schools with strict disciplinary climates. Strikingly, the negative effect of strict disciplinary climate exists net of students’ own receipt of disciplinary actions. That is, the negative association between strict disciplinary climate and the realization of academic potential for African American students applies to African American students regardless of whether they themselves have been in trouble at school. This study reveals that characteristics of schools that lack immediately obvious racial implications, such as a school's approach to student discipline, may be just as harmful as overtly racialized inequality within and between schools.