Peer Observation of Teaching (POT) is one of the areas which is steadily gaining importance in higher education. Nevertheless, it is generally shrouded with uncertainty, doubt, and a lack of procedural understanding, especially in the context of small states where the number of teachers is limited. This study explores faculty perceptions of Peer Observation of Teaching (POT) in a micro higher education institution in Malta. The findings reveal that factors such as smallness, the ‘already known factor’, guardedness, personalism, and fear of being judged shape how faculty view POT. The research advocates shifting from evaluative to developmental or peer-to-peer models of POT to suit the cultural intricacies of small states. It stresses the importance of transparent policies to foster trust and accountability and recommends enhancing relational and dialogic approaches to foster collegiality and offering Higher Education teaching training. These insights transcend small island states and are applicable to various educational settings, offering valuable lessons for teaching and quality assurance globally.