Nursing home quality indicators have been developed over the past 10 years to quantify nursing home quality and to draw systematic comparisons between facilities. Although these indicators have been applied widely for nursing home regulation, quality improvement, and public reporting, researchers and stakeholders have raised concerns about their accuracy and usefulness. We critically evaluate nursing home quality indicators from the standpoint of theory, measurement, and application, and we recommend strategies to make the indicators more valuable as quality assessment tools. We recommend that (a) more comprehensive quality indicators should be developed in conjunction with the new Minimum Data Set 3.0; (b) the validity and reliability of the indicators should be evaluated thoroughly with respect to both measurement and application; (c) statistical criteria should be incorporated explicitly into quality indicator scoring and outlier targeting; (d) the dimensionality and theoretical structure of the quality indicators should be carefully examined; (e) risk adjustment methods should be refined and broadened; and (f) quality indicator reporting systems should be strengthened and tailored to stakeholders' needs.Key Words: Quality indicators, Nursing home, Quality of care, Measurement