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This chapter focuses on two assertions about education and labour market organisation in Germany: (1) that Germany has a labour market organised along occupational lines; and (2) that in Germany labour market position is strongly predicted by level and type of education. It begins by setting the context in which the German education/labour market relationship has developed. Three dimensions of labour market outcomes are studied: labour force participation and unemployment; level of prestige obtained in first job; and class position of first job. These outcomes are then related to the educational and social background characteristics of labour force entrants. Changes in these relationships for both men and women during the last decades are examined in light of several major social and economic changes. These changes are: the increasingly higher education of labour market entrants; the increasing labour force participation of women; the transition into an economy where the supply of jobs falls short of the demand for employment; and the transformation of the occupational structure from industrially based to service based.