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Three succeeding Finnish governments have decided to implement national vocational skills demonstrations in initial vocational secondary level education. Finally the law on skills demonstrations was passed during the summer 2005. Altogether 32 pilot projects have been conducted in cooperation by vocational institutions, teacher education polytechnics, labour unions and educational authorities under the governance of the National Board of Education in Finland, funded by the European Social Fund and the Finnish Ministry of Education from the year 2000. Vocational skills demonstrations are a form of competence-based assessment, in which students have to demonstrate the most important vocational skills during work-based learning periods to get their vocational degree. The policy targets of the new system call for a more European dimension, transparency, comparability, recognition of competences and/or qualifications and quality assurance in vocational education. The purpose of this paper is to analyse how vocational skills demonstrations change work-based learning. The data consists of middle and final reports from piloting vocational institutions, their curricula, teaching material and websites, 8 qualitative group interviews and a small survey to analyse the transferability of the results. The vocational skills demonstrations developed by the pilots had been continued in all the vocational institutions after the cessation of the projects. They had had their strongest effects on work-based learning, which had changed to be more targeted than earlier. Also the quality of work-based learning had risen. Cooperation with working life had increased. The growing involvement of workplace tutors in the assessment of the students' competence had increased the motivation of students. In spite of the probable problems with future funding and the need for support during implementation, vocational skills demonstrations will fulfil many of the expectations set by policymakers and, together with the recent restructuring of the national curricula towards more work-based learning, be a successful initiative in the Finnish vocational education. It will not enhance only the European dimension but also the transparency of qualifications in global labour markets.