Inherited predisposition to disease is often linked to reduced activity of a disease associated gene product. Thus, quantitation of the influence of inherited variants on gene function can potentially be used to predict the disease relevance of these variants. While many disease genes have been extensively characterized at the functional level, few assays based on functional properties of the encoded proteins have been established for the purpose of predicting the contribution of rare inherited variants to disease. Much of the difficulty in establishing predictive functional assays stems from the technical complexity of the assays. However, perhaps the most challenging aspect of functional assay development for clinical testing purposes is the absolute requirement for validation of the sensitivity and specificity of the assays and the determination of positive predictive values (PPVs) and negative predictive values (NPVs) of the assays relative to a “gold standard” measure of disease predisposition. In this commentary, we provide examples of some of the functional assays under development for several cancer predisposition genes (BRCA1, BRCA2, CDKN2A, and mismatch repair [MMR] genes MLH1, MSH2, MSH6, and PMS2) and present a detailed review of the issues associated with functional assay development. We conclude that validation is paramount for all assays that will be used for clinical interpretation of inherited variants of any gene, but note that in certain circumstances information derived from incompletely validated assays may be valuable for classification of variants for clinical purposes when used to supplement data derived from other sources. Hum Mutat 29(11), 1314–1326, 2008. © 2008 Wiley-Liss, Inc.