Pre-service teacher education comprises essential courses to prepare prospective teachers for effective classroom assessment practices. The study analyzes study material on students' assessment and assessment literacy of prospective teachers is investigated which require close attention of policy makers and practitioners for authentic assessment in classrooms. A sequential triangulation research design, using mix-method approaches, has been used for this research. All distance education students studying in B.Ed. and M.Ed. programs at Allama Iqbal Open University, Islamabad make the target population of the study. Through random sampling techniques, a sample of 344 prospective teachers and 18 teacher educators constitute the sample group. Results indicate that the study material satisfied the standards as stipulated in the National Professional Standards for Teachers in Pakistan; however, the assessment literacy of prospective teachers was found unsatisfactory. Furthermore, it was revealed that students' low motivation, low interaction between tutors and prospective teachers, and traditional approaches and beliefs were found to be the areas requiring urgent attention with regard to reforms in assessment. The presentation of study materials is found to be less engaging with no clearly specified road map for implementation in classrooms. Assessment practices by teacher educators included only summative approaches. Therefore, it is recommended that the study materials may be re-designed to ensure that it leads towards prospective teachers' assessment literacy.