In 1988 the Alberta government introduced a new resident classification system to measure the nursing care requirements of long-term care facility residents, and to provide case-mix information for a new funding system. This article describes the conceptual and methodological development of the system. Specific steps in the development process were to (1) define key care domains reflecting the major types of assistance required by long-term care residents; (2) identify indicators of care requirements within each care domain; (3) develop criteria for determining which items to include in the final version of the Resident Classification Form; (4) develop decision rules for combining scores on individual items in order to group residents into categories; and (5) test the psychometric properties of the classification system. The classification system has seven categories ordered from low to high in terms of nursing care requirements and a measure of nursing resource use.