Inclusive educational reforms have important policy shift implications. This paper examines an educational policy reform from Chile, which focuses on transforming grade retention practices. Before this policy, grade retention in Chile was a common practice, largely unchanged over decades. Effective in 2020, the reform marked a significant shift towards eliminating automatic grade retention, advocating for its use only as an extraordinary measure. This study explored stakeholder perceptions and opinions to comprehensively analyse the creation, negotiation, and initial implementation of Decree 67, the specific public policy initiative within the context of a policy-making agency in Chile that forbade automatic retention due to low grades and/or low attendance. We explored the process from the policy’s inception through its negotiation stages to its implementation and prospects. Employing a qualitative methodology, we conducted semi-structured interviews with key informants involved in the policy’s creation, negotiation, and implementation, complemented by a documentary analysis of documents used for its creation. Our findings revealed contrasting beliefs of policymakers and teachers regarding grade retention, the rationale and negotiation processes underpinning the policy shift, and the challenges encountered during its dissemination and implementation. By examining this policy shift, the paper sheds light on the complexities and challenges of public policy development within agency-policy makers and the potential problems in achieving effective educational change. The research underscores the need for supportive mechanisms and political consensus to ensure the effective integration of inclusive educational practices.