BACKGROUND: The American Physical Therapy Association (APTA) conducted a two-year process of literature review, writing, discussion, and debate within a panel of four subject matter experts in design, administration, and interpretation of Functional Capacity Evaluations (FCE). This process resulted in a Best Practice Guidelines document which was then adopted by the APTA. OBJECTIVE: This article provides additional clarification regarding best practices and standard methodology for functional capacity evaluations including standard terminology for use by physical therapists and vocational rehabilitation professionals in determining the types of work a patient has the capacity of performing. METHODS: The clarification of the role of the FCE, who is qualified to conduct an FCE, complexities such as ‘good effort’ and pain in the evaluation process, clarification of terms from different government agencies, and the implications for disability determination are discussed. RESULTS: Specific guidelines for best practice with FCE are suggested and demonstrated through case studies. CONCLUSION: The best practice guidelines are detailed here to set forth qualification standards for FCE examiners and to promote clinical excellence, accountability, and consistency in the design, administration, and interpretation of FCEs.