People with schizophrenia frequently have significant problems in community functioning. Progress in developing effective interventions to ameliorate these problems has been slowed by the absence of reliable and valid measures that are suitable for use in clinical trials. The National Institute of Mental Health convened a workgroup in September 2005 to examine this issue and make recommendations to the field that would foster research in this area. This article reports on issues raised at the meeting. Many instruments have been developed to assess community functioning, but overall insufficient attention has been paid to psychometric issues and many instruments are not suitable for use in clinical trials. Consumer self-report, informant report, ratings by clinicians and trained raters, and behavioral assessment all can provide useful and valid information in some circumstances and may be practical for use in clinical trials. However, insufficient attention has been paid to when and how different forms of assessment and sources of information are useful or how to understand inconsistencies. A major limiting factor in development of reliable and valid instruments is failure to develop a suitable model of functioning and its primary mediators and moderators. Several examples that can guide thinking are presented. Finally, the field is limited by the absence of an objective gold standard of community functioning. Hence, outcomes must be evaluated in part by "clinical significance." This criterion is problematic because different observers and constituencies often have different opinions about what types of change are clinically important and how much change is significant.