The first category of recognition is Commended Scholars; it comprises about 34,000 of the top 50,000 students. All 50,000 students are initially notified of their standing; from this pool 34,000 are eventually named Commended Scholars (who do not advance further), 16,000 are named Semifinalists; in turn from this pool, the Finalists are selected. The 34,000 Commended Scholars who are not selected as Semifinalists do not continue in the competition and do not receive scholarships from NMSC. As aforementioned, the Semifinalist group numbers around 16,000, though designations factor in equitable state representation. Therefore, each state has different cutoff scores. California's cutoff score for 2004 tests was 217 out of a possible 240 points. Maryland's cutoff score was 220 out of a possible 240 points.

Approximately 15,000 of the 16,000 Semifinalists advance to Finalist standings, based on the submission of SAT scores and an application. The application includes high school courses and grades, extracurricular and volunteer activities, a recommendation from the principal, and a 500-word Personal Statement. The personal information provided is used later in the process to determine the award of scholarships to Finalists; the mere submission of required materials is generally enough to advance to Finalist standing. Generally, Semifinalists who fail to advance to Finalist standing do so because they failed to submit the application, have improper credentials (e.g. a large discrepancy between PSAT and SAT scores), or, in rarer cases, are convicted felons.

For the 15,000 Finalists, there will be about 8,200 merit awards: about 2,500 finalists receive a $2,500 National Merit Scholarship from the NMSC for use at a college or university in the United States; these winners are awarded on a state-by-state basis. There are 4,600 scholarships awarded by colleges which the recipients have reported to NMSC as their first choice ("College-Sponsored Merit Awards"). Around another 2,700 scholarships are awarded to Finalists by corporate sponsors, who often have additional qualification criteria- usually that the Finalist is the son, daughter, or other close relative (e.g. niece or nephew) of an employee of the sponsor.

Finalists who do not qualify will receive a certificate of recognition for their accomplishments. Around 1,600 participants who were not chosen as Finalists will receive Special Scholarships provided by corporate sponsors.

Because the NMSC only awards scholarships to students attending colleges in the United States, a small number of National Merit Scholars lose their scholarship awards. These students are designated as Honorary Merit Scholars, an award which acknowledges achievement without giving the student any financial assistance. Similarly, students who qualify as both National Achievement or National Hispanic Scholars and also National Merit Scholars may only receive the monetary award from one scholarship but can still claim the other as an accomplishment.