This is comparative study of two rural water supply and sanitation projects in Kerala, similar in practically all aspects except that one project incorporated community participation in it and the other did not. The study compares the outcomes in the two projects and finds that there is unmistakable evidence that community participation has a favourable impact on the outcomes. The following are the ways through which this linkage gets established: (i) better aggregation of preferences; (ii) better design through use of local knowledge; (iii) pressure by community on bureaucracies to perform; and (iv) better sustainability through feeling of ownership. Community participation is effective under certain institutional conditions which are discussed in the paper.