To the extent that students’ academic performance is affected by the composition of their classmates, peer effect is an important topic for social scientists, policymakers, and educators. If it does exist, it can provide opportunities for policy intervention in the optimal allocation of students and create avenues for enhancing social welfare. In this professional thesis, I study gender peer effects in China, specifically how the proportion of females in a classroom affects students’ overall academic performance. I will present evidence regarding the existence of such effects and investigate the underlying mechanisms. Discussion will follow on the non-linearity of such gender peer effects. It will be studied whether there will be more efficient distribution of students that will enhance overall students’ achievements. I will conduct a calibration to simulate gender peer effects in different scenarios and provide policy implications based on the magnitude and direction of such effects.