Background Understanding how faculty judge and appraise students' performance during simulation and what factors influence the process may lead to more consistent and effective evaluation outcomes. The purpose of this grounded theory study was to explore the process by which nursing faculty evaluate a student performance in simulation. Method This qualitative study utilized semi-structured interviews and video elicitation according to the guidelines of grounded theory methodology. Results A conceptual model was developed with four main concepts: perceived expectations, influences, simulation event, outcomes, and evaluation approach with perceived expectations as the core phenomenon. Conclusion Although study results clearly identify the importance of a systematic approach to evaluation, the literature yields little information regarding a step-by-step process for faculty evaluation.