Participant observation has long been utilized as a valuable research methodology in the study of illicit drug abuse. It should not be viewed in isolation, but seen as an essential complement to the quantitative analysis of trends in drug use, such as epidemiological studies and the monitoring of services for drug users. Fieldwork conducted at the Drug Indicators Project and other relevant studies highlight the practical and ethical problems faced by the participant observer, including issues of access, co-operation and confidentiality. This is particularly pertinent when working with drug users not in contact with services. When working with drug users in a treatment context, the need to be flexible and sensitive to the needs of agency staff is stressed, and the ways in which participant observers can operate as volunteers are explored. Contemporary concern about HIV infection, AIDS, and risk behaviour amongst drug users, raises the potential for an expansion and redefinition of the role of the participant observer to take on some of the functions of health educator, and two options are suggested.