This study aimed to explore the washback effects of implementing online formative assessment (OFA) in Iranian Teacher Education Universities. To this end, a sample of 227 prospective teachers majoring in Teaching English as a Foreign Language and 21 teacher educators were randomly selected. In an explanatory sequential design, their perceptions of the washback effects of the OFA were measured via a researcher-made questionnaire and a semi-structured interview. The results of the quantitative phase of the study showed that the washback effects of the new assessment modality were mainly negative. The results also revealed some perceptual mismatches between the prospective teachers and their educators. The qualitative results confirmed those observed in the quantitative data while shedding light on the origin of those areas of mismatch. It can be concluded that teacher educators have been unable to take full advantage of OFA in education.