The idea of capacity development has become ubiquitous in discussions of development assistance: a lack of capacity in developing countries is frequently identified as the main obstacle to development and building ‘capacity’ is seen as the most important output of development assistance. The terms ‘capacity development’ and ‘capacity building’ are, however, relatively new in development assistance discourse, having only come into frequent use in the last two decades. This paper examines the history and different uses of the concept of capacity in development assistance literature, tracing its origins and rise in popularity. Although a large amount of material has been produced on the topic there is no clear agreement on what it means, with a range of interpretations used by different authors and in different contexts. The more expansive and ambitious approaches promoted by some development organizations have a number of theoretical and practical difficulties and it is argued that the wide and imprecise use of the term has undermined its usefulness.