PurposeContinuous observation of psychiatric inpatients aims to protect those who pose an acute risk of harm to self or others, but involves intrusive privacy restrictions. Initiating, conducting and ending continuous observation requires complex decision-making about keeping patients safe whilst protecting their privacy. There is little published guidance about how to balance privacy and safety concerns, and how staff and patients negotiate this in practice is unknown. To inform best practice, the present study, therefore, aimed to understand how staff and patients experience negotiating the balance between privacy and safety during decision-making about continuous observation.MethodsThematic analysis of qualitative interviews with thirty-one inpatient psychiatric staff and twenty-eight inpatients.ResultsMost patients struggled with the lack of privacy but valued feeling safe during continuous observation. Staff and patients linked good decision-making to using continuous observation for short periods and taking positive risks, understanding and collaborating with the patient, and working together as a supportive staff team. Poor decision-making was linked to insufficient consideration of observation’s iatrogenic potential, insufficient collaboration with patients, and the stressful impact on staff of conducting observations and managing risk.ConclusionsBest practice in decision-making about continuous observation may be facilitated by making decisions in collaboration with patients, and by staff supporting each-other in positive risk-taking. To achieve truly patient-centred decision-making, decisions about observation should not be influenced by staff’s own stress levels. To address the negative impact of staff stress on decision-making, it may be helpful to improve staff training, education and support structures.Electronic supplementary materialThe online version of this article (doi:10.1007/s00127-017-1338-4) contains supplementary material, which is available to authorized users.