The Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) defines capacity development as the process of strengthening the abilities or capacities of individuals, organisations and societies to make effective and efficient use of resources, in order to achieve their own goals on a sustainable basis.

Capacity development has been one of GTZ's core tasks ever since it was founded. Initially the focus was on building the technical skills of individuals, while in the eighties the priority shifted to development of organisations in partner countries.

Experience showed, however, that sustainable development cannot be achieved simply by strengthening people and organisations through training and through the transfer of technical and organisational expertise, in combination with technical resources. Where the political and institutional frameworks in a society are unfavourable, all efforts are likely to generate at best only limited impacts, and may ultimately be doomed to failure.

In the 1990s, GTZ was therefore commissioned by Germany's Federal Ministry for Economic Cooperation and Development (BMZ) to extend its work to include measures designed to help improve economic, social, ecological, and political frameworks in partner countries.

GTZ is guided in its understanding of capacity development by both the development-policy guidelines of the German Government, and the standards of international cooperation. In order to continuously improve its performance, GTZ incorporates its own experience and that of other bilateral and multilateral organisations into its work.