In this article, we review the limitations of traditional rehabilitation functional outcome instruments currently in use within the rehabilitation field to assess Activity and Participation domains as defined by the International Classification of Function, Disability, and Health. These include a narrow scope of functional outcomes, data incompatibility across instruments, and the precision vs feasibility dilemma. Following this, we illustrate how contemporary measurement techniques, such as item response theory methods combined with computer adaptive testing methodology, can be applied in rehabilitation to design functional outcome instruments that are comprehensive in scope, accurate, allow for compatibility across instruments, and are sensitive to clinically important change without sacrificing their feasibility. Finally, we present some of the pressing challenges that need to be overcome to provide effective dissemination and training assistance to ensure that current and future generations of rehabilitation professionals are familiar with and skilled in the application of contemporary outcomes measurement.