Background In 2008, the government of Tanzania adopted a competency-based education and training (CBET) system to improve medical training. Yet there are still frequent observations of competency deficits among graduates, suggesting that the goal has not sufficiently been met. This study was designed to assess the underlying context of competency deficits in the health workforce in Tanzania and to provide recommendations for improvement. Methods A cross-sectional study using document analysis and focus groups was carried out in 13 training institutions that provided a diploma course in clinical medicine. The research team assessed availability and adequacy of instructors, physical resources and the process and systemic factors that impact curriculum implementation outcomes. Results Six (46%) institutions had 75% or more of their teaching staff not trained in curriculum delivery and instructional methods. Seven (54%) institutions had lower instructor-students ratio than recommended (1:25). Overall, the full-time instructors in all institutions constituted only 44% of the teaching staff. Although all institutions had an adequate number of classrooms, the rooms were of small size with dilapidated walls, and had inadequate number of desks/ seats for students. Clinical skills laboratories existed in 11 (85%) institutions, but the majority were of small size, and were not fully equipped as per guidelines and were rarely used. Libraries were available in 12 (92%) institutions but five had seating capacities of 10% or less of the available students. Participants of focus group discussion in the majority of the institutions reported inadequate time allocated for practice and support from the clinical instructors at the practicum sites. Six (46%) institutions had no functioning governing/advisory boards and five (38%) lacked quality assurance policies and implementation plans. Conclusions Currently, health-training institutions in Tanzania are ill-equipped to produce competent clinicians because of major gaps in the structural, process and systemic components. These findings call for major investment to facilitate production of a competent health workforce.