Psychological flexibility is the tendency to respond to situations in ways that facilitate valued goal pursuit. Psychological flexibility is particularly useful when challenges arise during goal pursuit that produce distress. In acceptance and commitment therapy, psychological flexibility is considered the pinnacle of emotional health and well‐being. A growing body of research demonstrates that psychological flexibility leads to psychological benefits and adaptive behavior change. Yet, much of what we know, or think we know, about psychological flexibility hinges on a single measurement approach using the Acceptance and Action Questionnaire (AAQ and AAQ‐II). Research suggests the AAQ‐II is highly correlated with distress itself rather than flexible responses to distress. Existing approaches that assess psychological flexibility ignore the context in which flexibility matters most: the pursuit of valued goals. Below, we review theory and research on psychological flexibility, including its associations with healthy functioning, its measurement, and its overlap with related constructs. We discuss how gaps between theory and measurement impede our understanding and review promising evidence for a new measure of psychological flexibility. We provide new research directions in an effort to create a more generalizable foundation of knowledge.