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In electrical engineering programs, physical Laboratory courses should enable students to apply theory to design, to synthesize and analyze circuits and systems, and gain practical hands-on skills and knowledge required for their future career. However, students often have difficulty applying electrical theory to problem solving tasks, such as those encountered in lab experiments; therefore, an alternative approach to lab instruction is desirable. A study at Vanderbilt University explored the potential of organizing electrical engineering labs around challenges. A learning model called Software Technology for Assessment and Reflection (STAR) Legacy was adopted in designing the lab learning process. The model combines problem-solving challenges and instructional resources with Web-based technology. This paper describes the structure of the innovative challenge-based lab design, and presents student and instructor evaluations of this design.