Based on an analysis of the nature of theory that is relevant to teachers, this paper presents an approach to teacher education, the realistic approach, and reports on its use in two countries. The paper uses the concepts of episteme and phronesis to introduce a new way of looking at theory that is relevant for teacher development. Section 1 examines the traditional approach to teacher education. Section 2 describes the causes of the transfer problem in teacher education and how it blockades teacher development. Section 3 focuses on the new paradigm, noting that ideas developed in the paper are derived mainly from theories on mathematics learning and teaching. Section 4 presents realistic mathematics education as an example. Section 5 describes realistic teacher education. Section 6 examines theory. Section 7 discusses the promotion of reflection. Section 8 describes the introduction of the realistic approach into teacher education at Queen's University in Canada and Utrecht University in the Netherlands. Section 9 concludes by discussing how the realistic approach can narrow the gap between theory and practice, noting that certain issues need special attention. It examines the demands that the principles discussed in this paper put on teacher educators. (Contains approximately 69 references.) (SM)