Fifty years ago, they were the latest thing in educational reform: big, modern, suburban high schools with students counted in the thousands. As baby boomers came of high-school age, big schools promised economic efficiency, a greater choice of courses, and, of course, better football teams. Only years later did we understand the trade-offs this involved: the creation of lumbering bureaucracies, the difficulty of forging personal connections between teachers and students. SAT scores began dropping in 1963; today, on average, 30 percent of students do not complete high school in four years, a figure that rises to 50 percent in poor urban neighborhoods. While the emphasis on teaching to higher, test-driven standards embodied in No Child Left Behind resulted in significantly better performance in elementary (and some middle) schools, high schools for a variety of reasons seemed stuck in a rut.

Size isnt everything, but it does matter, and the past decade has seen a noticeable countertrend toward smaller schools. This has been fostered, in part, by the Bill and Melinda Gates Foundation, which has invested $1.8 billion in American high schools, helping to open about 1,000 small schools—most of them with about 400 kids each, with an average enrollment of only 150 per grade. About 500 more are on the drawing board. Districts all over the country are taking notice, along with mayors in cities like New York, Chicago, Milwaukee and San Diego. The movement includes independent public charter schools, such as No. 1 BASIS in Tucson, with only 120 high-schoolers and 18 graduates this year. It embraces district-sanctioned magnet schools, such as the Talented and Gifted School, with 198 students, and the Science and Engineering Magnet, with 383, which share a building in Dallas, as well as the City Honors School in Buffalo, N.Y., which grew out of volunteer evening seminars for students. And it includes alternative schools with students selected by lottery, such as H-B Woodlawn in Arlington, Va. And most conspicuous of all, there is the phenomenon of large urban and suburban high schools that have split up into smaller units of a few hundred, generally housed in the same sprawling grounds that once boasted thousands of students all marching to the same band.

Hillsdale High School in San Mateo, Calif., is one of those, ranking No. 423 among the top 2 percent in the country on NEWSWEEKs annual ranking of Americas top high schools. The success of small schools is apparent in the listings. Ten years ago, when the first NEWSWEEK list based on college-level test participation was published, only three of the top 100 schools had graduating classes smaller than 100 students. This year there are 22. Nearly 250 schools on the full NEWSWEEK list of the top 5 percent of schools nationally, available on Newsweek.com, had fewer than 200 graduates in 2007.

Although many of Hillsdales students came from affluent households, by the late 1990s average test scores were sliding and it had earned the unaffectionate nickname "Hillsjail." Jeff Gilbert, a Hillsdale teacher who became principal last year, remembers sitting with other teachers watching students file out of a graduation ceremony and asking one another in astonishment, "How did that student graduate?"

So in 2003 Hillsdale remade itself into three "houses," romantically designated Florence, Marrakech and Kyoto. Each of the 300 arriving ninth graders are randomly assigned to one of the houses, where they will keep the same four core subject teachers for two years, before moving on to another for 11th and 12th grades. The closeness this system fosters was reinforced by the institution of "advisory" classes. Teachers meet with students in groups of 25, five mornings a week, for open-ended discussions of everything from homework problems to bullying and bad Saturday-night dates. The advisers also meet with students privately and stay in touch with parents, so they are deeply invested in the students success. "Were constantly talking about one anothers advisees, " says English teacher Chris Crockett. "If you hear that yours isnt doing well in algebra, or see them sitting outside the deans office, its like a personal failure." Along with the new structure came a more rigorous academic program; the percentage of freshmen taking biology jumped from 17 to 95. "It was rough for some, but by senior year, two thirds have moved up to physics," says Gilbert. "Our kids are coming to school in part because they know there are adults here who know them and care for them." But not all schools show advances after downsizing, and it remains to be seen whether smaller schools will be a panacea.

The NEWSWEEK list of top U.S. high schools was compiled this year, as in years past, according to a single metric, the proportion of students taking college-level exams: Cambridge, International Baccalaureate and Advanced Placement. We count the total number of these tests taken at a school by all students each May, and divide by the number of graduating seniors. Any school with a ratio of 1.000 or higher is placed on the NEWSWEEK list. Over the years this system has come in for its share of criticism for its simplicity. But that is also its strength: its easy for readers to understand, and to do the arithmetic for their own schools if theyd like.

For more information visit NEWSWEEK