Effective and legitimate governance supposedly form a mutually reinforcing relationship, a virtuous circle of governance. We critically explore this argument in the context of limited statehood and underline why such areas challenge key assumptions underpinning the virtuous circle argument. In this special issue we ask: Does the effectiveness of governance affect the legitimacy of governance actors and institutions in areas of limited statehood, and vice versa? We develop a theoretical model of the virtuous circle and show that making such circles work is more complex, demanding and unlikely than often assumed. Empirical studies need to take these complexities into account, and policy makers are well-advised to adjust their policies accordingly.