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U.S. public schools are highly segregated by both race and class. Prior research shows that the desegregation of Southern schools in the 1960s and 1970s led to significant benefits for black students, including increased educational attainment and higher earnings. We do not know, however, whether segregation today has the same harmful effects as it did 50 years ago, nor do we have clear evidence about the mechanisms through which segregation affects achievement patterns. In this paper we estimate the effects of current-day school segregation on racial achievement gaps. We use 8 years of data from all public school districts in the U.S. We find that racial school segregation is strongly associated with the magnitude of achievement gaps in 3rd grade, and with the rate at which gaps grow from third to eighth grade. The association of racial segregation with achievement gaps is completely accounted for by racial differences in school poverty: racial segregation appears to be harmful because it concentrates minority students in high-poverty schools, which are, on average, less effective than lower-poverty schools. Finally, we conduct exploratory analyses to examine potential mechanisms through which differential enrollment in high-poverty schools leads to inequality. We find that the effects of school poverty do not appear to be explained by differences in the set of measurable teacher or school characteristics available to us.