This article examines the Performance Measurement System (PMS), a new approach to evaluating performance and cost of public health departments, developed under the sponsorship of the National Science Foundation. Four weaknesses characterizing presently used evaluation designs are described. The PMS method is briefly summarized and one practical application of the method, to hypertension control, is discussed in detail. PMS is an adaptation of the systems approach to evaluating human service programs, using both epidemiologic and industrial engineering concepts. The method was developed to serve the needs of on-line managers who are responsible for day-today supervision and evaluation. Six steps are described for the implementation of PMS: systems design; formulation of explicit quantified, time-limited objectives; the development of gauges; the construction of performance appraisal indicators (PAIs); the development of activity efficiency indicators (AEIs) and cost-effectiveness indicators (CEIs); and the development of staff support indicators (SSIs). Metods for the analysis of PMS indicators are examined. PMS has been incorporated into the evaluation plan of the Detroit Hypertension Control Program, a 5-year demonstration project funded by the National Heart, Lung, and Blood Institute. Other applications have included an implementation of the method in the Preventable Disease Division of the Connecticut State Health Department. The development and use of PMS performance and cost indicators for the Detroit project are thoroughly examined.