This paper describes a collaborative action research approach used to explore peer observation of teaching (POT) within the online environment. Although POT has become familiar in face-to-face teaching contexts, little is understood of its potential role in online settings. We conducted "virtual" focus groups to explore the experience and views of 28 teachers and subjected our data to a thematic analysis. This informed the implementation of an innovative program of POT, "Peer-to-peer Reflection on Pedagogical Practice" (PROPP) among tutors of a Web-based MSc in International Primary Health Care at University College London. Modeled on an action learning set, the program encourages collaborative reflection on teaching practices, based on participants' specific examples of online teaching. The PROPP model is consistent with Quality Enhancement, which we distinguish from Quality Assurance. Here, we describe the implementation of the PROPP program within an action research framework and identify the factors that we consider critical to the success of peer observation within online courses. We highlight examples of aspects of teaching that have been discussed within the PROPP program and offer suggestions of the kinds of evidence that could be incorporated into a portfolio to demonstrate the effectiveness of such an initiative. (Contains 3 tables.)