The Internet of Things (IoT) has the potential to help firms to innovate and to address new business opportunities. However, many companies face difficulties in developing value propositions for products and services based on this technology. Considering this, we aimed to answer the following research question: which elements need to be considered to develop value propositions for IoT-based products and services? We used the Design Science Research (DSR) method to answer this question through the creation and testing of a specific framework to support the development of this type of value proposition. The framework was evaluated by 31 academic experts and practitioners and applied to two real businesses. It considers critical elements related to the value proposition and the relations between the main architecture layers of the IoT (including capabilities and challenges), the different types of values that can be generated for different actors, as well as the strategic positioning of IoT-based products and services.