Background: This study is part of a larger community-based participatory research (CBPR) project to develop, implement, and evaluate the physical activity component of a school-based wellness policy. The policy intervention is being carried out by community stakeholders and academic researchers within the Kahnawake Schools Diabetes Prevention Project, a well-established health promotion organization in the Indigenous community of Kahnawake, Quebec. Methods: We explored how a group of stakeholders develop a school physical activity policy in a participatory manner, and examined factors serving as facilitators and barriers to the development process. This case study was guided by an interpretive description approach and draws upon data from documentary analysis and participant observation. Results: A CBPR approach allowed academic researchers and community stakeholders to codevelop a physical activity policy that is both evidence-based and contextually appropriate. The development process was influenced by a variety of barriers and facilitators including working within existing structures, securing appropriate stakeholders, and school contextual factors. Conclusions: This research offers a process framework that others developing school-based wellness policies may use with appropriate modifications based on local environments.