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In response to education’s call for the development of high stakes tests that provide diagnostic information at the student level, researchers have developed the cognitive diagnostic assessment (CDA) approach to instrument development and item response analysis. Researchers have also made significant progress in evaluating new CDA psychometric tools- e.g., diagnostic classification models (DCM) and rule space method (RSM)- by applying them to existing sets of responses from large scale assessments. However, progress toward the development of novel, diagnostic-oriented instruments, especially in more complex cognitive domains such as reading comprehension, has lagged. This paper examines the benefits and challenges of the CDA method, encountered during the course of developing a prototype large-scale assessment of reading comprehension.