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Despite the fact that grade retention is now seen as controversial in many quarters, it remains common practice in numerous countries. Previous research on the effects of grade retention on student development has, however, generated ambiguous results, particularly in terms of motivational outcomes. This ambiguity has been attributed in part to a lack of high-quality studies including a longitudinal design, a suitable comparison group, and adequate statistical control of preretention differences. Based on longitudinal data of N = 3,288 German students over 3 years of secondary school, we examined differences in their academic self-concept, scholarly interests, learning motivation, and achievement motivation between those being retained in the 6th grade (n = 61) and those of the same age being promoted annually. To account for confounding variables, we applied full propensity score matching on baseline measures of the dependent variables, as well as various other covariates that have been found to be associated with the risk of retention (e.g., cognitive ability, academic performance, and family background variables). Results reveal a steep decline in students’ academic self-concept, interests, and learning motivation during the last months spent in the original class, just before retention. For those measures that were available, negative effects were still partly significant after 1 year, but had diminished 2 years after grade retention. Contrary to predictions suggested by the big-fish-little-pond effect, we found no positive effects of retention on students’ academic self-concept.