Introduction: Novel uses of video aim to enhance assessment in health-professionals education. Whilst these uses presume equivalence between video and live scoring, some research suggests that poorly understood variations could challenge validity. We aimed to understand examiners' and students' interaction with video whilst developing procedures to promote its optimal use. Methods: Using design-based research we developed theory and procedures for video use in assessment, iteratively adapting conditions across simulated OSCE stations. We explored examiners' and students' perceptions using think-aloud, interviews and focus group. Data were analysed using constructivist grounded-theory methods. Results: Video-based assessment produced detachment and reduced volitional control for examiners. Examiners ability to make valid video-based judgements was mediated by the interaction of station content and specifically selected filming parameters. Examiners displayed several judgemental tendencies which helped them manage videos' limitations but could also bias judgements in some circumstances. Students rarely found carefully-placed cameras intrusive and considered filming acceptable if adequately justified. Discussion: Successful use of video-based assessment relies on balancing the need to ensure station-specific information adequacy; avoiding disruptive intrusion; and the degree of justification provided by video's educational purpose. Video has the potential to enhance assessment validity and students' learning when an appropriate balance is achieved.