Capacity improvement has become central to strategies used to develop health systems in low-income countries. Experience suggests that achieving better health outcomes requires both increased investment (i.e. financial resources) and adequate local capacity to use resources effectively. International donors and non-governmental agencies, as well as ministries of health, are therefore increasingly relying on capacity building to enhance overall performance in the health sector. Despite the growing interest in capacity improvement, there has been little consensus among practitioners and academics on definitions of 'capacity building' and how to evaluate it. This paper aims to review current knowledge and experiences from ongoing efforts to monitor and evaluate capacity building interventions in the health sector in developing countries. It draws on a wide range of sources to develop (1) a definition of capacity building and (2) a conceptual framework for mapping capacity and measuring the effects of capacity building interventions. Mapping is the initial step in the design of capacity building interventions and provides a framework for monitoring and evaluating their effectiveness. Capacity mapping is useful to planners because it makes explicit the assumptions underlying the relationship between capacity and health system performance and provides a framework for testing those assumptions.