Consultants are an integral component of development aid. Their involvement is based on an assumption of the transferability of knowledge to clients and beneficiaries. However, this role, its efficacy and the concept of knowledge transfer have all been questioned. Although research has shown interest in northern development consultants in recent years, detailed processes and practices of southern consultants' engagement with knowledge production are less analysed. Drawing on debates about knowledge, power and managing development interventions and on extensive fieldwork exploring a Bolivian consultancy company's assignments for northern development agencies, we analyse the ‘knowledge engagements’ between clients, consultants and beneficiaries. The results suggest a novel theorisation: knowledge engagements are shaped by power relations exercised through discourses and financial aid on one hand and shared and unshared lifeworlds and backgrounds of actors on the other. They are also characterised by collusive behaviour with the discourses and practices of aid on the part of consultants and beneficiaries, which in turn influences outcomes. Southern consultants, although aware of these issues, are in a difficult position to challenge these relationships. A greater recognition of the tensions could lead to a new role for consultants if collective action were to renegotiate their terms of engagement and aim for a new mutuality. Copyright © 2013 John Wiley & Sons, Ltd.