The purpose of graded stakes is to provide owners, breeders and fans of Thoroughbred horses a reliable guide to the relative quality of Thoroughbreds by identifying those U.S. races which recent renewals have consistently attracted the highest-quality competition. 

A committee meets annually to evaluate and assess the relative quality of stakes races, and issues its collective opinion in the form of ranked grades: Grade 1, Grade 2, Grade 3 and Listed, with Grade 1 being the highest.

Horses that win these graded races may reliably be considered as superior racing stock, and the breeding stock producing them as superior breeding stock.