The purpose of this paper is to review the theoretical and empirical literature relevant to language performance assessment. Following a definition of performance assessment, this paper considers: (1) theoretical assumptions underlying performance assessment; (2) purposes of performance assessment; (3) performance assessment procedures; (4) merits and demerits of performance assessment; (5) language performance assessment formats and research relevant to each format; (6) criteria for selecting performance assessment formats; (7) alternative groupings for assessing student performance; (8) performance assessment via computers and research related to this area; (9) reliability and validity of performance assessment and research related to this area; and (10) conclusions drawn from the literature reviewed in this paper.