AbstractThere has been growing interest, when comparing an experimental treatment with an active control with respect to a binary outcome, in allowing the non‐inferiority margin to depend on the unknown success rate in the control group. It does not seem universally recognized, however, that the statistical test should appropriately adjust for the uncertainty surrounding the non‐inferiority margin. In this paper, we inspect a naive procedure that treats an “observed margin” as if it were fixed a priori, and explain why it might not be valid. We then derive a class of tests based on the delta method, including the Wald test and the score test, for a smooth margin. An alternative derivation is given for the asymptotic distribution of the likelihood ratio statistic, again for a smooth margin. We discuss the asymptotic behavior of these tests when applied to a piecewise smooth margin. A simple condition on the margin function is given which allows the likelihood ratio test to carry over to a piecewise smooth margin using the same critical value as for a smooth margin. Simulation experiments are conducted, under a smooth margin and a piecewise linear margin, to evaluate the finite‐sample performance of the asymptotic tests studied. (© 2006 WILEY‐VCH Verlag GmbH & Co. KGaA, Weinheim)