AbstractIn order to shed further light on the discussion about decentralisation‐poverty linkages in developing countries, this article introduces a conceptual framework for the relationship between decentralisation and poverty. The framework takes the form of an optimal scenario and indicates potential ways for an impact of decentralisation on poverty. Three different but interrelated channels are identified. Decentralisation is considered to affect poverty through providing opportunities for previously excluded people to participate in public decision‐making, through increasing efficiency in the provision of local public services due to an informational advantage of local governments over the central government and through granting autonomy to geographically separable conflict groups and entitling local bodies to resolve local‐level conflicts. Based on the experience with decentralisation in Uganda, it is shown that these channels are often not fully realised in practice. Different reasons are singled out for the Ugandan case, among them low levels of information about local government affairs, limited human capital and financial resources, restricted local autonomy, corruption and patronage, high administrative costs related with decentralisation and low downward accountability. Copyright © 2007 John Wiley & Sons, Ltd.