The limitations in the methods which are usually used in stage theory test analysis to determine the stage of development of an individual are outlined. Piaget's and Kohlberg's conceptions of moral judgment are presented along with one method of estimating a subject's level of development. The concept of a latent trait is developed. Its relationship to a stage sequence, through stating the probability of being in each stage, is illustrated in a non-technical manner. Using nine situations or stories pointing up a moral dilemma, the stage boundaries within stories, the discriminating powers of the stories, and the latent trait value parameters are derived using maximum likelihood procedures. The calculation of discriminating power requires the derivation of a new form of polychric correlation coefficient. Various studies reported in the literature concerning differences in moral judgment among ages, sexes, socioeconomic classes and culture are replicated and the procedures developed here applied to the data. Finally, the tests of the assumptions required by the model, the results of the above replications, and the generalizability of the method of analysis are discussed in some detail. (Author/DG)