The main purpose of this study was to find out challenges affecting implementation of health care activities under health basket fund in Tanzania local governments. This study employed a mixed descriptive study design, comprising 30 respondents conveniently selected. Data were collected through questionnaires and interviews and analysed by using descriptive statistics with the aid of SPSS as a tool after they were coded. The major findings were as follows: firstly, the health basket fund has a number of challenges that include: delay disbursement of fund being the giant challenge (60 Per cent); complexity in procurement process (37.5 Per cent); time required to complete procurement circle(37.5Per cent); bureaucracy in the procurement process(25 Per cent); loss of funds request letters(72.7 Per cent ); transport facilities(72.7 Per cent); little amount of funds disbursed(9.1 Per cent ); bureaucracy by the medical store department(75 Per cent); distance to MSD(25 Per cent); non team working from non-medical staff(63.6 Per cent ); and merged account system of the local government(63.6 Per cent) and acting officials(27.3 Per cent). Secondly, 57.1 per cent of all sources of funds mentioned do provide less amount than those budgeted; thirdly, funds from central government always come late; also OC is dominant in being delayed in the release of funds. Also, the results show that there is almost a balance between the Ministry and the local Governments in being the most strategic mitigation point (56.25 Per cent and 43.75 Per cent respectively). On the other side, the majority of the respondents agreed that delay of funds (60 Per cent), late submission of reports (63.6 Per cent), transport problems (87.5 Per cent), fewer funds disbursed (3.3 Per cent), ad hoc activities and complexity of disbursement procedure at the Ministerial level (10 Per cent each) and loss of funds request letter (63.6 Per cent) can affect implementation of health care activities. Despite all the challenges mentioned, 2014/2015 performance is better than that one of 2013/2014 as the unspent balance is only 7.6 Per cent comparing to 29 Per cent of 2013/2014.