The meaningful assessment of competence is critical for the implementation of effective competency-based medical education (CBME). Timely ongoing assessments are needed along with comprehensive periodic reviews to ensure that trainees continue to progress. New approaches are needed to optimize the use of multiple assessors and assessments; to synthesize the data collected from multiple assessors and multiple types of assessments; to develop faculty competence in assessment; and to ensure that relationships between the givers and receivers of feedback are appropriate. This paper describes the core principles of assessment for learning and assessment of learning. It addresses several ways to ensure the effectiveness of assessment programs, including using the right combination of assessment methods and conducting careful assessor selection and training. It provides a reconceptualization of the role of psychometrics and articulates the importance of a group process in determining trainees' progress. In addition, it notes that, to reach its potential as a driver in trainee development, quality care, and patient safety, CBME requires effective information management and documentation as well as ongoing consideration of ways to improve the assessment system.