We are just at the outset of reforming the quality of school education in Hong Kong. The Education Commission Report No. 7 recommends that the quality of school education should be assured by a two-prone strategy: external monitoring through the implementation of whole school inspections by the Quality Assurance Inspectorate and internal school self-evaluation. The performance of schools will be audited against sets of indicators prescribed by the Education Department. This paper depicts generally the origin, functions, classification and characteristics of the performance indicators (PIs) and specifically the advantages and disadvantages of using the PIs in assuring the quality of school education. The recent educational development in Hong Kong is also reviewed. The author concludes that the quality of school education in Hong Kong should be promoted through an internal assurance mechanism (school self-evaluation) rather than an external monitoring system (whole school inspections) in the long run.