BACKGROUND: Frameworks for legitimate and fair priority setting emphasise the importance of the rationales for priority setting decisions. However, priority setting rationales, in particular for new cancer drugs, are not well described. We describe the rationales used by a committee making funding decisions for new cancer drugs. METHODS: We did a qualitative case study of a priority setting committee (Cancer Care Ontario Policy Advisory Committee for the New Drug Funding Program) by analysing documents, interviewing committee members, and observing committee meetings. FINDINGS: We identified and described decisions and rationales related to 14 drugs in eight disease conditions over 3 years. Our main findings were that: priority setting existed in relation to resource mobilisation; clinical benefit was the primary factor in decisions; in the context of an expanding budget, rationales changed; rationales could change as costs for individual treatments increased; when all options were reasonable, groups funded a range of options and let patients decide; and priority setting rationales involve clusters of factors, not simple trade-offs. INTERPRETATION: Observing priority-setting decisions and their rationales in actual practice reveals lessons not contained in theoretical accounts.