Background: Recent technological advances in integrated circuits, wireless communications, and physiological sensing allow miniature, lightweight, ultra-low power, intelligent monitoring devices. A number of these devices can be integrated into a Wireless Body Area Network (WBAN), a new enabling technology for health monitoring. Methods: Using off-the-shelf wireless sensors we designed a prototype WBAN which features a standard ZigBee compliant radio and a common set of physiological, kinetic, and environmental sensors. Results: We introduce a multi-tier telemedicine system and describe how we optimized our prototype WBAN implementation for computer-assisted physical rehabilitation applications and ambulatory monitoring. The system performs real-time analysis of sensors' data, provides guidance and feedback to the user, and can generate warnings based on the user's state, level of activity, and environmental conditions. In addition, all recorded information can be transferred to medical servers via the Internet and seamlessly integrated into the user's electronic medical record and research databases. Conclusion: WBANs promise inexpensive, unobtrusive, and unsupervised ambulatory monitoring during normal daily activities for prolonged periods of time. To make this technology ubiquitous and affordable, a number of challenging issues should be resolved, such as system design, configuration and customization, seamless integration, standardization, further utilization of common off-the-shelf components, security and privacy, and social issues.