Rural water supply services in Pakistan are funded by government and should, in theory, be managed by communities but community management is often ineffective. Operators often assume management responsibilities, collecting tariffs and paying bills and in effect acting as informal contractors. The paper examines the potential for improving water supply services through more formal forms of private sector involvement in service provision. It concludes that localised forms of private sector involvement are possible but will be dependent on action to develop private sector capacity, implement effective oversight arrangements and provide support to oversight bodies and private sector operators. Possible arrangements for managing services and providing oversight and support are discussed. Copyright © 2007 John Wiley & Sons, Ltd.