Background. Men with a low-risk prostate cancer (PCa) should consider observation, particularly active surveillance (AS), a monitoring strategy that avoids active treatment (AT) in the absence of disease progression. Objective. To determine clinical and decision-making factors predicting treatment selection. Design. Prospective cohort study. Setting. Kaiser Permanente Northern California (KPNC). Patients. Men newly diagnosed with low-risk PCa between 2012 and 2014 who remained enrolled in KPNC for 12 months following diagnosis. Measurements. We used surveys and medical record abstractions to measure sociodemographic and clinical characteristics and psychological and decision-making factors. Men were classified as being on observation if they did not undergo AT within 12 months of diagnosis. We performed multivariable logistic regression analyses. Results. The average age of the 1171 subjects was 61.5 years (s = 7.2 years), and 81% were white. Overall, 639 (57%) were managed with observation; in adjusted analyses, significant predictors of observation included awareness of low-risk status (odds ratio 1.75; 95% confidence interval 1.04-2.94), knowing that observation was an option (3.62; 1.62-8.09), having concerns about treatment-related quality of life (1.21, 1.09-1.34), reporting a urologist recommendation for observation (8.20; 4.68-14.4), and having a lower clinical stage (T1c v. T2a, 2.11; 1.16-3.84). Conversely, valuing cancer control (1.54; 1.37-1.72) and greater decisional certainty (1.66; 1.18-2.35) were predictive of AT. Limitations. Results may be less generalizable to other types of health care systems and to more diverse populations. Conclusions. Many participants selected observation, and this was associated with tumor characteristics. However, nonclinical decisional factors also independently predicted treatment selection. Efforts to provide early decision support, particularly targeting knowledge deficits, and reassurance to men with low-risk cancers may facilitate better decision making and increase uptake of observation, particularly AS.