Development aid has evolved in response to a dramatically changing global, political, and economic landscape. This chapter examines this evolution and discusess what seems to determine the effectiveness of aid as seen by donors, intended beneficiaries, and outside observers, and what could be done to make aid more effective. A major difficulty in improving the effectiveness of aid is in assessing the causal links between aid and its development outcomes. The Marshall Plan gave rise to many of the elements of the existing system of aid delivery. Policy conditionality in seeking to achieve greater aid effectiveness has been hampered by fungibility of infra-marginal transfers and lack of enforceability. The chapter considers sovereign donors, aid agencies, and aid recipients separately, and looks at some of the strategies that have been introduced to enhance aid effectiveness. The debate on aid effectiveness is an empirical question, which calls for rigorous impact evaluation of what has been done.