This article analyses private sector delivery of water and sanitation services in Uganda. Uganda's policies of decentralization and privatization, combined with enhanced sector funding through debt relief, provide the context for the work described. After a brief description of the attributes of small water sector enterprises, the findings of extensive interviews with all the major stakeholders in eight of Uganda's 56 districts are set out under eight thematic headings (corruption; community participation; role of NGOs; private sector support services; networks and associations; local Government procurement procedures; construction quality; business viability) and two sets of root causes. The paper concludes that a sector strategy requires a limited number of focus areas in order to avoid overwhelming the institutions and local ownership. The strategy should lie between the extremes of prescriptive and process oriented approaches. Monitoring mechanisms should balance quantitative with qualitative data. Finally, a balance is needed between the drive for short-term impact through physical outputs and the long-term sustainability of water and sanitation services so delivered. Copyright © 2003 John Wiley & Sons, Ltd.