Despite an impressive amount of research and policy intervention no robust pattern of neighborhood effects on educational attainment has previously been identified. Adequate theoretical modeling and the sensitivity of the results to the method of the study are the major challenges in this area of research. This paper elaborates the social mechanisms of neighborhood effects and applies various methodological approaches to test them. Using data from Switzerland, the research reported here has detected heterogeneous effects of neighborhood on elementary school students’ educational achievement in Zurich. Although modest in comparison with the effects of classroom composition, these effects appear to be mediated primarily through social integration into a local peer network and are differentiated according to students’ gender and their social origin.