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Various attempts have been made in India with respect to decentralization, most significantly the 73rd Amendment to the Constitution of India (1993) which provided the necessary legal framework for decentralization to take place. However, the outcome has been mixed: an evaluation of the impact of decentralization in the health sector found virtually no change in health system performance and access to health services in terms of availability of health personnel or improvement in various health indicators, such as Infant Mortality Rates or Maternal Mortality Ratio. Subsequently, there has been a conscious effort under the National Rural Health Mission (NRHM)—launched in 2005—to promote decentralization of funds, functions and functionaries to lower levels of government; and Karnataka had a head-start since devolution of all 29 functions prescribed by the 73rd Amendment had already taken place in the state by the late 1990s. This study presents the findings of an on-going research effort to build empirical evidence on decentralization in the health sector and its impact on system performance. The focus here is on analyzing the responses of health personnel at the district level and below on their perceived ‘Decision Space’—the range of choice or autonomy they see themselves as having along a series of functional dimensions. Overall, the data indicate that there is a substantial gap between the spirit of the NRHM guidelines on decentralization and the actual implementation on the ground. There is a need for substantial capacity building at all levels of the health system to genuinely empower functionaries, particularly at the district level, in order to translate the benefits of decentralization into reality.