Papua New Guinea decentralized a wide range of health functions to provincial governments between 1977 and 1983. The national Department of Health (DOH) was given no role in provincial budget and staffing decisions, and the national health budget was fragmented into the health components of provincial budgets. The impact of decentralization on health workforce development was particularly severe and largely unforeseen. Many difficulties were inherent in the manner in which decentralization regulations structured power relationships. Others arose as a result of the administrative confusion and inflamed relationships that accompanied the forceful transfer of power from a very reluctant national DOH to the provinces. Even though policy formulation and planning were retained as national functions, decentralization hampered their effective execution. Human resource data bases deteriorated, responsibility for planning became confused, and the ability of the DOH to implement its planning decisions was compromised. In reality, health workforce planning was carried out by the Departments of Finance and Planning, and Personnel Management through the annual budgetary process of provincial financial limits and staff ceilings, without any attempt to assess health service needs, either in the country as a whole or between the provinces. Decentralization brought a need for new management skills, and it complicated administrative relationships between training institutions and the provinces. The Papua New Guinea experience has shown that in a decentralized health service, there is a great potential for conflict between national goals and the aspirations of individual provinces. To achieve an equitable, appropriate and effective staffing of services, standards must be formulated as the basis for planning and conflict resolution. Effective linkages between central government departments and between the national and provincial health authorities must be developed, and management and technical skills of health managers improved.