The purpose of this article is to report the development and psychometric testing of the Edmonton Functional Assessment Tool (EFAT). The EFAT was developed as a functional outcome measure for use with a palliative care population. The assessment identified ten functional activities important to patients even in the terminal stage of their illness. In addition, a global performance status rating (PS) asked for an overall judgment of functional status after the ten EFAT functions were evaluated. Tests for interrater reliability and concurrent validity were conducted on a sample of 25 inpatients on the Palliative Care Unit (PCU) at the Edmonton General Hospital (EGH) who were evaluated independently by two raters. Interrater reliability of the EFAT expressed as an intraclass correlation (ICC) was established at 0.88. The interrater reliability of these two raters was 0.71 for the Karnofsky Performance Status (KPS) and 0.81 for the performance status measure of the Eastern Cooperative Oncology Group (ECOG). Concurrent validity of the EFAT was demonstrated by correlating the total EFAT score with the KPS (r = -0.79, P = 0.0001) and the ECOG (r = 0.85, P = 0.0001). The total EFAT score was also strongly correlated with the global PS rating scale (r = 0.90, P = 0.0001). Construct validity of the EFAT was tested with a sample of 101 patients admitted to the unit, which was later divided into the unit group (N = 88) and the home group (N = 13). Our findings provided initial evidence that the EFAT distinguished between the functional status of these two groups. The results of this preliminary study suggest that the EFAT requires further research and development, but shows potential to evolve as a useful clinical tool in palliative care.