The 27 May 2006 Yogyakarta earthquake caused the death of more than 5700 people; more than 60 000 people were injured and hundreds of thousands lost their homes. Bantul District was most severely affected by the earthquake. This paper is an attempt to understand the determinants of livelihood recovery after this natural disaster and, in particular, the role of aid in that recovery process. A panel firm-level survey was conducted by visiting approximately 500 mostly small and micro enterprises in Bantul District on two occasions: 6 and 12 months after the earthquake. This paper argues that: (i) smaller enterprises are more resilient and so are able to recover faster; (ii) an industrial cluster system within a sub-district provides the necessary support for firms to recover; (iii) the quality of village infrastructure could be important; (iv) it is important to distribute aid as early as possible (the faster it is distributed, the better the impact on enterprises affected by the earthquake); and (v) donors should not give too much assurance of financial support to enterprises in cases where the delivery date is uncertain, but rather just provide support when it is actually available.