Organizing a classroom library is no small task. There are so many ways it can be done; you just have to choose a way that works for you. It is suggested that 1/3 of your library is organized by level and the other 2/3 is organized by topic or genre. Here is my library.
The first shelf is for my leveled tubs. I have marked each book on the inside cover with the F&P reading level and my name. I've put a sticker on the spine of each book that is color coded to each tub. A-I are pink, J-L purple, M-O blue, P-R green, S-U yellow, V-W orange, X-Z red. The books in these tubs are my fiction chapter books (Although I also have pulled some of the fiction chapter books to go in my topic tubs).
The second shelf holds my magazines (also organized) and some of my topic tubs: Poetry, History, Space, Science, Tales, Animals, Biomes/Geography, and Fiction (picture books). They have a range of reading levels and not necessarily marked with the levels. Students are taught to select just-right books on their own, just like they'll have to do as an adult.
The third shelf holds dictionaries, thesauruses, and the rest of my topic/genre tubs: Various Non-fiction, Revolutionary War, holidays, sports, biographies, jobs, Mrs. O's favorites, Principal's Picks, Math &Language, Historical Fiction, and Books in a Series. These tubs may change throughout the year based on what we are studying, and students can play a role in this decision.
The tubs across the top of the shelves are for book clubs/research groups, etc. When we did a unit on Nonfiction, the students picked topics and formed research groups. My minilessons revolved around non-fiction and they were able to practice with their group's research books. We then did a study on historical fiction, so they were put into historical fiction book clubs. Each tub held the books and binder for the group. We will soon be embarking on a Fantasy study. Students are very excited to get started in the books they've chosen!
However you choose to organize your library, the important thing is to do it in a way that makes finding an interesting and good-fit book easy for the students.