A new authentic performance-based approach to assessing problem solving was developed for use in vocational education and other programs in Australia. The process of developing the problem-solving assessment instrument and process included the following phases: (1) exploration of the theoretical conceptions of problem solving; (2) identification of five major component processes in problem solving; (3) formulation of sets of indicators for each of the five processes; and (4) description of sets of performance levels for each indicator. A study of the problem-solving assessment instrument established its reliability in assessing problem-solving performance across a range of tasks within the Electronics and Information Technology program at Torrens Valley Institute of Technical and Further Education. The instrument worked well in a validation study undertaken in Torrens Valley Institute's Certificate IV in Workplace Assessment and Training course. The new assessment processes that were used in the trial of the problem-solving assessment instrument, which involved both self-assessment and lecturer validation, not only led to assessment of the key competency of problem solving but also to its development among participants. (Twenty-seven tables/figures are included. The bibliography lists 86 references. The following items are appended: consent and personal details forms; an outline of the problem-solving assessment procedure; the problem-solving inventory; the problem-solving assessment instrument; and student evaluation comments.) (MN)