Objective: To compare levels of patient satisfaction between the diagnostic and treatment protocols in an ED-based asthma observation unit (AOU) and those with standard inpatient hospitalization. Methods: This was a prospective, randomized, controlled trial with a sample of 163 patients presenting to the ED with acute asthma exacerbations over a 30-month period. Eligible patients were those who could not resolve their symptoms after three hours of standard ED therapy. Patients were then randomly assigned to an ED-based AOU (experimental group) or to customary inpatient care (control group). Patient satisfaction and problems with care processes were assessed by standardized instrumentation at discharge in both groups. Results: The AOU patients scored higher than those randomized to the inpatient hospitalization protocol on four summary ratings of patient satisfaction measures: received service wanted, recommendation of the service to others, satisfaction with the service, and overall satisfaction. The AOU patients reported fewer total number of problems with care received, and fewer specific problems with communication, emotional support, physical comfort, and special needs, than did the inpatient group. However, the AOU patients reported more problems regarding their knowledge of financial costs and liabilities for their service than did the inpatients. Conclusion: Patients were more satisfied and had fewer problems with rapid diagnosis and treatment in the AOU than they did with routine inpatient hospitalization. Since AOUs represent a new ambulatory service modality, patients would benefit from greater awareness of the costs and coverage for AOUs as compared with hospital inpatient care. These findings have important implications for the future short- and long-term success and feasibility of ED-based AOUs.