Community-based participant-observation purposefully combines participant-observation and community-based participatory research. While participant-observation is the core method of ethnography and foundational to cultural anthropology, community-based participatory research initially emerged from health and related applied sciences to align researchers' and communities' agendas through focused collaboration. Participant-observation and community-based participatory research have different scholarly origins and norms but are united in centering communities' understandings on their terms. Combining the strengths of both, we provide a step-by-step explanation of community-based participant-observation, with examples from a study of water insecurity in colonias north of the U.S.-Mexico border. Using community-based participant-observation, researchers can facilitate the co-production of knowledge and community benefit by analyzing high-quality data that inform theory building and basic research. [The authors acknowledge the co-authorship of the Action for Water Equity Consortium.]