The purpose of this thesis is to examine literary theory and its effect on the formation and practice of the final two semesters of the optional Victorian Certificate of Education's (VCE) Literature Study Design (units 3 and 4). It concentrates on the first year of VCE's full implementation, 1992. The thesis begins with an outline of the changes to the final two years of secondary education. The broad reasons for change together with the directions that were taken with the VCE are discussed. The review of literature, discusses three areas of literary theory. It considers textual criticism which concentrates on the word on the page, reader response with focuses on the reader as an active meaning maker of the text, and contextual criticism which explores the contexts in which a text is created and consumed. This thesis then reports, the research study which used an interpretative methodology to gather data from those who formed the course, those responsible for the administration of it, and those who taught it. Units 3 and 4 of the Literature Study Design are then outlined and explored. This is done by using the three areas of literary theory discussed, together with informants' comments on the required work. The verification process used within the assessment of students' work is also discussed. The next section focuses in detail on the informants' understandings of the two verified common assessment tasks. The implications of the informants understandings of the common assessment tasks are discussed within the framework of literary theory. The thesis concludes with an overview of the findings that have been discussed.