The shift in emphasis from teacher to learner-centred pedagogies worldwide has foregrounded formative assessment as a pedagogical tool that increases student engagement. The purpose of the current study was to explore students’ perceptions and perspectives regarding the way formative assessment is implemented in order to guide teaching and assessment in institutions of higher education. The study was guided by Lev Vygotsky’s theory of social constructivism which regards learning as a social activity. Purposive sampling was used to select 15 second-year pre-service teachers from one public university in Uganda. Focus group discussions were used to collect in-depth data on students’ views and experiences with formative assessment practices. The themes and sub-themes generated in the study indicated that students perceived formative assessment as continuous assessment whose purpose is to test understanding by grading. In addition, their understanding of formative assessment was consistent with the methods of assessment used. The study also revealed that traditional methods of assessment were dominant in higher education, yet most students preferred alternative methods that were more beneficial because they provided immediate feedback and increased their participation compared to tests and written assignments. Many students reported challenges with getting feedback, which was attributed to large class size, emphasis on the grading purpose and university policies. The insights will inform institutions of higher education about the benefits of using learner-oriented assessment strategies that provide opportunities for students’ engagement in learning and assessment. In addition, the study may guide policymakers to institute policies that promote a balanced assessment and revise the assessment guidelines to align them with the principles and practices of formative assessment.