The use of the reference condition approach (RCA) in environmental assessments is becoming more prevalent. Although the RCA was not explicitly described in Green's (1979) book on statistical methods for environmental biologists, we expanded his decision key for selecting an appropriate environmental study design to include this approach. The RCA compares the biological community at a potentially impacted ‘test’ site to communities found in minimally impacted ‘reference’ sites. However, to implement the RCA there are a number of assumptions and decisions that must be made. We compare several common multimetric and multivariate bioassessment methods to illustrate that four key decisions inherent in the RCA framework (i.e., criteria used for reference site selection, for grouping similar reference sites, for comparing test and reference sites, and for evaluating the cause of impacts) can markedly affect test site appraisals. Specific guidelines should be developed to select appropriate reference sites. Based on analyses of real and simulated data, we recommend a minimum of 20, but preferably 30 to 50 reference sites per group, and verification of groupings with more than one classification method. New approaches (e.g., test site analysis) incorporating the strengths of both multimetric and multivariate methods can be used to compare test and reference sites. Additional ecological information, models relating degree of impact to a stressor or habitat gradient, and variance partitioning can also be used to isolate the probable cause of impairment, and are particularly valuable when appropriate reference sites are unavailable.