In 1986, Congress enacted the Immigration Reform and Control Act (IRCA), which for the first time makes it illegal for employers to hire undocumented immigrants. This provision is counterbalanced by a legislative ban on discrimination in employment on the basis of national origin or, under certain circumstances, citizenship status. This report identifies four major challenges to the law's implementers, most notably the Immigration and Naturalization Service (INS): (1) establishing the legitimacy of sanctions as a new set of employment regulations; (2) satisfying the exacting legal requirements that attach to business regulation (and generally do not apply to relations with immigrants); (3) adapting the INS, which was designed for one purpose--to deal with immigrants--to the very different purposes of educating, regulating, inspecting, and sanctioning employers; and (4) regulating a vast economic process with limited investigative enforcement resources. The authors conclude that the implementers have essentially met the challenges of IRCA's first three years.