BACKGROUND: An instrument was required to quantify and thus potentially measure progress towards a Health of the Nation target, set by the Department of Health, "to improve significantly the health and social functioning of mentally ill people". METHOD: A first draft was created in consultation with experts and on the basis of literature review. This version was improved during four stages of testing: two preliminary stages, a large field trial involving 2706 patients (rated by 492 clinicians) and tests of the final Health of the Nation Outcome Scales (HoNOS), which included an independent study (n = 197) of reliability and relationship to other instruments. RESULTS: The resulting 12-item instrument is simple to use, covers clinical problems and social functioning with reasonable adequacy, has been generally acceptable to clinicians who have used it, is sensitive to change or the lack of it, showed good reliability in independent trials and compared reasonably well with equivalent items in the Brief Psychiatric Rating Scales and Role Functioning Scales. CONCLUSIONS: The key test for HoNOS is that clinicians should want to use it for their own purposes. In general, it has passed that test. A further possibility, that HoNOS data collected routinely as part of a minimum data set, for example for the Care Programme Approach, could also be useful in anonymized and aggregated form for public health purposes, is therefore testable but has not yet been tested.