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OBJECTIVE: To provide an overview of reasons why qualitative methods have been used and can be used in health services and health policy research, to describe a range of specific methods, and to give examples of their application. DATA SOURCES: Classic and contemporary descriptions of the underpinnings and applications of qualitative research methods and studies that have used such methods to examine important health services and health policy issues. PRINCIPAL FINDINGS: Qualitative research methods are valuable in providing rich descriptions of complex phenomena; tracking unique or unexpected events; illuminating the experience and interpretation of events by actors with widely differing stakes and roles; giving voice to those whose views are rarely heard; conducting initial explorations to develop theories and to generate and even test hypotheses; and moving toward explanations. Qualitative and quantitative methods can be complementary, used in sequence or in tandem. The best qualitative research is systematic and rigorous, and it seeks to reduce bias and error and to identify evidence that disconfirms initial or emergent hypotheses. CONCLUSIONS: Qualitative methods have much to contribute to health services and health policy research, especially as such research deals with rapid change and develops a more fully integrated theory base and research agenda. However, the field must build on the best traditions and techniques of qualitative methods and must recognize that special training and experience are essential to the application of these methods.