In this study, we present data on graduate students' actual experiences in dealing with impaired peers and faculty predictions of how students would deal with such situations. A total of 29 faculty and 73 graduate students responded to a survey of 40 randomly selected clinical psychology training programs. Student respondents were almost universally (95%) aware of peers whom they regarded as impaired in their professional functioning, and half (49%) the sample reported being aware of a peer's ethical impropriety. Faculty overestimated (...) the number of students who said they "did nothing" when confronted with the resulting ethical dilemma and underestimated the degree of conflict and turmoil (i.e., anger, frustration, dismay) that students reported experiencing. Faculty also estimated that students would be more concerned with peer loyalty issues, whereas students indicated that they were strongly motivated by ethical considerations. Ethics curricula ought more thoroughly to address affective concerns through experiential learning vehicles such as faculty modeling, simulation exercises, and small-group discussion. (shrink)