This article discusses how capacity development is a key component of the 1996 amendments to the Safe Drinking Water Act (SDWA) in focusing on the prevention of noncompliance by drinking water systems. The relationship between capacity development and the Drinking Water State Revolving Fund (DWSRF) is explored. The US Environmental Protection Agency's (USEPA's) implementation of capacity development provisions is also discussed. The issues that states must consider, solicit public comment on, and include as appropriate when developing a capacity development strategy are given. The unique challenges facing small drinking water systems are also addressed, including a listing of questions which the USEPA posed to the small systems working group in order to help focus their deliberations. Includes 12 references, tables, figure.