Background: The pedagogical and status implications of assessment in physical education (PE) have been recognised in the past. How students perceive being assessed and graded is a neglected area, however. While some studies have garnered students' perceptions of assessment when no grade is awarded or the stakes are relatively low, we know less about how assessment in physical education is perceived or experienced by students engaged in systems where grades have direct implications for students' educational or vocational futures. Purpose: The study presented in this article investigated the criterion-referenced assessment experiences and perceptions of Swedish physical education and health (PEH) students in their last year of compulsory schooling. Central questions were: what do the students understand as the basis for grading decisions in PEH and what do they perceive as the learning goals of the subject? Research design and data collection: A total of 355 students (189 boys and 166 girls) from 28 different schools participated. They were 15 to 16 years of age and attending school year 9. The study draws on data collected through both a questionnaire, which all students answered, and 23 focus groups interviews, in which 73 of the students participated. Findings: The majority of the responses from the students focused on attitudinal, dispositional and behavioural characteristics as opposed to stated learning outcomes in terms of the display of subject specific knowledge and physical capacity. The results indicated that students do think grades are important but they did not appear to recognise the official criteria as the predominant basis for achievement of grades in PEH. Significantly, the degree of student certainty in these elements was underpinned by their indication that the grading criteria were clear and that they were aware of the basis upon which grading judgements were made. Conclusions: We recommend that in order to promote a better alignment between the official assessment expectations of the PEH syllabus and students' perceptions of assessable elements, the Swedish education system should provide greater syllabus clarifications regarding assessment practices and continuing professional development focusing on task construction, criteria and standards construction, the collection and use of evidence and the alignment of curriculum, pedagogy and assessment. (Contains 1 table.