'observation-based' originates from English, composed of the noun 'observation' (ultimately from Latin 'observatio' formed from 'observare') and the adjective 'based' (from Latin 'basis' via Old French 'base'), where 'observare' meant 'to watch' and 'basis' meant 'foundation'.

'observation' changed from Latin 'observatio' to Old French/Medieval Latin forms and then to Middle English 'observacioun', eventually becoming the modern English 'observation'; 'based' developed from Latin 'basis' through Old French 'base' into Middle English 'base' and the past-participle/adjectival use 'based', and the compound modern English adjective 'observation-based' was formed by combining these elements.

Initially, the elements referred separately to 'the act of watching' and 'a foundation'; over time their combination evolved into the current meaning 'having a foundation in observation' or 'based on observed evidence'.