This paper describes how two research methodologies, grounded theory and action learning, were combined to produce a rigorous yet creative and flexible method for field study of a recent IT-based innovation, virtual teams. Essentially, an action learning program was used to train facilitators of virtual teams and generate research data while grounded theory techniques were used to analyze and interpret the data. This paper shows how this combined method can be used to develop local and practical theory for complex, human-centered areas of information technology. The implications of this grounded action learning approach for practice and research in IS will be discussed. (Contains 7 tables, 4 figures, and 1 footnote.)