This article explores the importance of new forms of governance in active labour market policies (activation) in two countries: Denmark and the Netherlands. Drawing on research with key stakeholders in these countries, we analyse how new governance, and particularly processes of contracting-out and localization, have found expression in recent reforms to activation. We conclude that localization and contracting-out may have a future role to play in the development of more locally responsive and individually focused services. But both countries have encountered problems in promoting joined-up services through local jobcentres, while contracting-out has not always led to the tailored, individually focused services envisaged by policy-makers. In both countries, there are also concerns that the restriction of the Public Employment Service to a ‘gatekeeping and signposting’ role will lead to inconsistencies in the quality of services, exposing the most disadvantaged to greater social risk.