PURPOSE: To measure the performances of first-year residents who had graduated from a medical school with a pass/fail grading system and to compare the preparedness of these graduates with that of their peers. METHOD: All 169 graduates of Stanford University School of Medicine's classes of 1993 and 1994 were included in this study. First-year program directors rated the performance of each Stanford graduate in 11 areas, compared the graduate's clinical preparedness with that of his or her peer group, and rated the accuracy of the dean's letter in presenting the graduate's capabilities. RESULTS: Responses were obtained for 144 of the 169 graduates (85%). The program directors rated the overall clinical competencies of most of the graduates as “superior” (76%) or “good” (22%); they rated very few as “unsatisfactory” (2%). When the Stanford graduates were compared with their peers, their clinical preparedness was judged “outstanding” (33%), “excellent” (44%), and “good” (20%); very few were judged “poor” (3%). Stratification of programs by either hospital or medical specialty did not reveal significant differences in overall clinical competence. Ninety-one percent of the responses reported that the dean's letters had accurately presented the capabilities of the graduates. CONCLUSION: Graduates from a medical school with a two-interval, pass/fail system successfully matched with strong, highly-sought-after postgraduate training programs, performed in a satisfactory to superior manner, and compared favorably with their peer group.