BackgroundWeak health systems in low- and middle-income countries are recognized as the major constraint in responding to the rising burden of chronic conditions. Despite recognition by global actors for the need for research on health systems, little attention has been given to the role played by local health systems. We aim to analyze a mixed local health system to identify the main challenges in delivering quality care for diabetes mellitus type 2.MethodsWe used the health system dynamics framework to analyze a health system in KG Halli, a poor urban neighborhood in South India. We conducted semi-structured interviews with healthcare providers located in and around the neighborhood who provide care to diabetes patients: three specialist and 13 non-specialist doctors, two pharmacists, and one laboratory technician. Observations at the health facilities were recorded in a field diary. Data were analyzed through thematic analysis.ResultThere is a lack of functional referral systems and a considerable overlap in provision of outpatient care for diabetes across the different levels of healthcare services in KG Halli. Inadequate use of patients’ medical records and lack of standard treatment protocols affect clinical decision-making. The poor regulation of the private sector, poor systemic coordination across healthcare providers and healthcare delivery platforms, widespread practice of bribery and absence of formal grievance redress platforms affect effective leadership and governance. There appears to be a trust deficit among patients and healthcare providers. The private sector, with a majority of healthcare providers lacking adequate training, operates to maximize profit, and healthcare for the poor is at best seen as charity.ConclusionsSystemic impediments in local health systems hinder the delivery of quality diabetes care to the urban poor. There is an urgent need to address these weaknesses in order to improve care for diabetes and other chronic conditions.