This paper attempts to illuminate the rationale of continuous assessment for competence development in secondary schools in Tanzania. Although, the curriculum for secondary schools in Tanzania has changed from content-based to competency-based, most teachers in secondary schools are still practicing traditional pen-and-pencil continuous assessment which is far from developing competence in students. There is a dire need for revising the assessment procedures, particularly continuous assessment to ensure the attainment of better competence level among students and realisation of high quality education in Tanzania. This paper examines the rationale of continuous assessment for competence development, as well as the challenges of implementing it. This paper recommends capacity building for secondary school teachers on competence-based assessment, so as to enable them to engage in authentic continuous assessment.