Governments worldwide have invested in teaching standards and performance benchmarks to improve teacher preparation and teacher quality that impacts student achievement. As a means of addressing these imperatives, the Australian government has recently encouraged formal partnerships between tertiary providers, schools and education systems in delivering teacher education and professional development, in particular for mentors. This article documents challenges and initial findings of the first year of a school-university partnership involving an Australian regional university and K-12 teacher-mentors located in rural schools. It describes the design and implementation of a contextualised professional development model, using participatory action research to build teacher capacity for mentoring and foster a culture of collaborative inquiry. The model discussed reflects a systematic approach to constructing knowledge, skills and roles essential to effective mentoring.