In recent decades, education systems worldwide have increasingly adopted external accountability policies as the centerpiece of a school reform movement. This study explored how much performance-based external accountability pressures affect the internal accountability measures of schools. Using 46 educational systems’ Program for International Student Assessment (PISA) 2012 data, we employed multi-level structural equation modeling to examine whether and how external accountability impacts internal accountability factors such as school principal leadership, teacher morale, teacher monitoring, and the consequences of teacher appraisal measured by the responses of school principals. The findings indicate that external accountability has a consistently positive impact on a principal’s performance goal oriented instructional leadership, which mediates the relationship of external accountability with other internal accountability factors. The impact of external accountability in low-performing schools was observed in strong principal leadership and was executed with severe consequences for teacher appraisal. We suggest a customized application of external accountability policies to schools in different contexts and for principals to focus on teacher morale and teacher monitoring more.