Several observation tools evaluate teaching quality in Physical Education (PE), but none of them cover the core competencies required to comprehensively assess whether the teacher is providing teaching quality in PE. The aim of this research is to develop, validate, and test the reliability of the System for Observing Teaching Competencies in Physical Education (SOTC-PE). The development of the SOTC-PE involved an eight-phase process. Validity and reliability testing were conducted for the SOTC-PE variables. Validity was tested using the Delphi method by a panel of experts and through representative video fragments. Reliability was tested by training external observers and calculating observer agreement with respect to the gold standard, as well as inter- and intra-observer agreement. The results indicate that the SOTC-PE is a valid and reliable tool for evaluating observable teaching competencies in PE.