“Alternative education” refers to programs, schools, and districts that serve students and school-aged youth who do not meet the standards of acceptable achievement in the regular public schools, regardless of the underlying causes. Alternative education offers environments and teaching techniques that are different from traditional public schools, as they are adapted to the capabilities, needs, and behaviors of individual students. Alternative education parallels the approach of classic education, in which a single teacher acts as the instructor and guide to an individual student in teaching him/her what is needed to navigate successfully and productively in a given socioeconomic and cultural environment. This paper outlines existing strategies for structuring and programming alternative schools in the areas of curricula, form or structure, and need-based orientations. A discussion of the economic benefits and costs of alternative education focuses on three issues: the direct per-pupil cost, the individual and social sectors impacted by alternative education, and how the benefits and costs linked to these sectors can be estimated. The concluding section of the paper offers recommendations for “capacity building” in alternative education. General advice is that if the capacity of the system is not sufficient to achieve the goal of providing the needed range of educational options, then the alternative educational system can be strengthened by using a variety of strategies. The strategies recommended are building a collaborative commitment and cultural norms for alternative schooling; reforming organizational and service-delivery structure; improving the performance of administrators and teachers; expanding access to new knowledge, resources, and ideas; and the creation of evaluation and accountability mechanisms. 1 table and 82 references