Skilled observation is an important component of effective teaching, and teacher education programs frequently require pre-service teachers (PTs) to observe during early field experiences. Much of the observational research has been conducted via the PT watching a videotape of an experienced teacher with a group of students who are specifically selected for their ability to listen to and follow directions well. Research in observation of physical education PTs has not investigated what PTs observe when they watch a peer teach as they are both learning to teach during an early field experience. The purpose of this study was, therefore, to identify what and how PTs observe when watching their peers teach during an early field experience while acting as a peer coach. The study utilized qualitative data collection and analysis methods. Participants included 36 junior-level PTs enrolled in an early teaching laboratory. They were engaged in peer coaching, and coached a partner who was teaching a small group of elementary through junior high school-age children a 40-minute physical education lesson. Coaches collected systematic observational data during lesson observation, and were instructed to write questions and comments on a Peer Coaching form to guide the post-lesson conference. Questions (i.e., clarifying, eliciting, leading) encourage a non-directive conference style which promotes a non-evaluative and non-judgmental environment that PTs perceive as safe. Data collected over two years included the questions and comments that the coaches wrote on the Peer Coaching forms. Five themes emerged: (a) systematic data collection guides observation, (b) the process allows PTs to put theory into practice, (c) coaches begin to see students as individual, (d) coaches put responsibility of the lesson on the PT, and (d) PTs begin to connect the dots of learning to teach. Suggestions for teacher educators include guiding observations to direct PTs to see what is being taught in teacher preparation coursework, and encouraging PTs to observe their peers teach the same students they will be teaching in subsequent lessons.Keyword(s): college level issues, professional development, professional preparation