The value of qualitative research in the development of Patient-Reported Outcome (PRO) measures has been recognized for many years. Very little information is available, however, in the PRO field on the conduct and analysis of qualitative research compared to the plethora of literature that is readily available on psychometrics. More recently, the focus has been placed on the concepts being measured and their meaning, and not in terms of correlation coefficients or factorial structure, but in their authenticity for patients. This paper that is authored by an international, interdisciplinary group of psychologists, psychometricians, regulatory experts, a physician, and a sociologist presents a method for developing PROs that are based on a foundation of rigorous qualitative research. This approach combines grounded theory methods and is underpinned by an overarching phenomenological framework. It is used to develop PRO items and scales that possess content validity and the ability to yield a measurement model for psychometric testing. This paper will present: 1) The rationale for the combination of these two schools of qualitative research; 2) the current tools that are used that include semi-structured interviews, a computerized software package, theoretical sampling, saturation and grounded theory data analysis methods; 3) examples of successful application of qualitative research to PRO development; and 4) future applications of qualitative research in upcoming/planned clinical trials.