The paper is a contribution to the discussions on how to combine systems theory and empirical research. The paper focuses on functional method, which on the one hand is claimed as the method of systems theory but on the other hand is often only mentioned in passing – in Niklas Luhmann’s later works as well as in recent discussions on systems theory. The contention of the paper is that functional method can still be an important driving force in the development of interesting empirical problematics and analyses. The first and major part of the paper is a reconstruction of main characteristics of functional method. It is demonstrated how the method generates observations and the question is raised about which problem(s) the method is a solution to. The second part discusses functional method in relation to Niklas Luhmann’s later theoretical developments, especially the theory of second order observation. The overall aim of the paper is to reconstruct central traits of functional method in order to demonstrate how it works, what its function is – and where its limitations might lie.