Long-term assessment of ambulatory behavior and joint motion are valuable tools for the evaluation of therapy effectiveness in patients with neuromuscular disorders and gait abnormalities. Even though there are several tools available to quantify ambulatory behavior in a home environment, reliable measurement of joint motion is still limited to laboratory tests. The aim of this study was to develop and evaluate a novel inertial sensor system for ambulatory behavior and joint motion measurement in the everyday environment. An algorithm for behavior classification, step detection, and knee angle calculation was developed. The validation protocol consisted of simulated daily activities in a laboratory environment. The tests were performed with ten healthy subjects and eleven patients with multiple sclerosis. Activity classification showed comparable performance to commercially available activPAL sensors. Step detection with our sensor system was more accurate. The calculated flexion-extension angle of the knee joint showed a root mean square error of less than 5° compared with results obtained using an electro-mechanical goniometer. This new system combines ambulatory behavior assessment and knee angle measurement for long-term measurement periods in a home environment. The wearable sensor system demonstrated high validity for behavior classification and knee joint angle measurement in a laboratory setting.