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Abstract Background A considerable amount of research has been conducted on clinical decision making (CDM) in short-term physical conditions. However, there is a lack of knowledge on CDM and its outcome in long-term illnesses, especially in care for people with severe mental illness. Methods/Design The study entitled "Clinical decision making and outcome in routine care for people with severe mental illness" (CEDAR) is carried out in six European countries (Denmark, Germany, Hungary, Italy, Switzerland and UK). First, CEDAR establishes a methodology to assess CDM in people with severe mental illness. Specific instruments are developed (and psychometric properties established) to measure CDM style, key elements of CDM in routine care, as well as CDM involvement and satisfaction from patient and therapist perspectives. Second, these instruments are being put to use in a multi-national prospective observational study (bimonthly assessments during a one-year observation period; N = 560). This study investigates the immediate, short- and long-term effect of CDM on crucial dimensions of clinical outcome (symptom level, quality of life, needs) by taking into account significant variables moderating the relationship between CDM and outcome. Discussion The results of this study will make possible to delineate quality indicators of CDM, as well as to specify prime areas for further improvement. Ingredients of best practice in CDM in the routine care for people with severe mental illness will be extracted and recommendations formulated. With its explicit focus on the patient role in CDM, CEDAR will also contribute to strengthening the service user perspective. This project will substantially add to improving the practice of CDM in mental health care across Europe. Trial register ISRCTN75841675.