Introductory physics lab instruction is undergoing a transformation, with increasing emphasis on developing experimentation and critical thinking skills. These changes present a need for standardized assessment instruments to determine the degree to which students develop these skills through instructional labs. In this article, we present the development and validation of the physics lab inventory of critical thinking (PLIC). We define critical thinking as the ability to use data and evidence to decide what to trust and what to do. The PLIC is a 10-question, closed-response assessment that probes student critical thinking skills in the context of physics experimentation. Using interviews and data from 5584 students at 29 institutions, we demonstrate, through qualitative and quantitative means, the validity and reliability of the instrument at measuring student critical thinking skills. This establishes a valuable new assessment instrument for instructional labs.