Traditionally, medical schools have tended to make assumptions that students will “automatically” engage in self-education effectively after graduation and subsequent training in residency and fellowships. In reality, the majority of medical graduates out in practice feel unprepared for learning on their own. Many medical schools are now adopting strategies and pedagogies to help students become self-regulating learners. Along with these changes in practices and pedagogy, many schools are eliminating a cornerstone of extrinsic motivation: discriminating grades. To study the effects of the switch from discriminating to pass–fail grading in the second year of medical school, we compared internal and external assessments and evaluations for a second-year class with a discriminating grading scale (Honors, High Pass, Pass, Fail) and for a second-year class with a pass–fail grading scale. Of the measures we compared (MCATs, GPAs, means on second-year examinations, USMLE Step 1 scores, residency placement, in which there were no statistically significant changes), the only statistically significant decreases (lower performance with pass fail) were found in two of the second-year courses. Performance in one other course also improved significantly. Pass–fail grading can meet several important intended outcomes, including “leveling the playing field” for incoming students with different academic backgrounds, reducing competition and fostering collaboration among members of a class, more time for extracurricular interests and personal activities. Pass–fail grading also reduces competition and supports collaboration, and fosters intrinsic motivation, which is key to self-regulated, lifelong learning.