Residency education in internal medicine should be based in the ambulatory setting. The challenge in ambulatory education lies not only in the unique opportunities afforded by the setting but also in the careful implementation of a program based on sound educational principles. We have designed a new ambulatory-based model of internal medicine residency that adheres to the principles of adult learning theory. Four aspects of the proposed residency model are discussed: the setting, the teaching-learning model, the curriculum, and the schedule. Potential barriers to implementation of the model are reviewed, and solutions are suggested. Residency programs in internal medicine are at an important crossroad. Either we can substantially change the programs' content and focus, or we can risk the continued unpopularity and "second-class" status of the programs among medical students. Internal medicine needs to be recognized and accepted as a fundamental primary care discipline to justify continued public support in an era of overspecialization.